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1 a . Put Purchasing Dept Cost on the Y axis for clarity. 1 b . Consider the visualizations. Do you notice any outliers and
a Put Purchasing Dept Cost on the Y axis for clarity. b Consider the visualizations. Do you notice any outliers and can you explain them with case data? Should you do anything about them ie retain, adjust, or exclude Do any potential drivers appear more promising? c Run the possible regression combinations ie all potential drivers at once and then each of the possible pairs Focus on the coefficients and consider what they are telling you. Which is best? a What would you tell Joe about cost behaviors at the stores? b What recommendations would make? Consolidated Western Wear Retailers: Regression Analysis to Understand Cost Drivers in a Purchasing Department Anne M A Sergeant, PhD CMA School of Accounting Seidman College of Business Grand Valley State University INTRODUCTION Dan's Western Wear began its humble roots on Main Street in Sheridan, Wyoming, where Thomas George, a Greek immigrant, settled his family in and began a cobbler business that served ranchers, cowboys, and coal miners. Dan George, Thomas' son, was nine years old when they arrived in the United States and was soon active in his father's cobbler business. Ultimately, he took over the business and began to increase the store's inventory, creating the business that is known today as Dan's Western Wear, which sells quality boots, work clothes, western apparel, and jewelry to just about anybody. Dan believes that if clothes can hold up to a dusty hard day's work, and look great at the same time, all the better. The company prides itself on quality clothes with good oldfashioned service. Customers are greeted at the door and helped throughout their experience. A visit to Dan's Western Wear is like a visit to an old friend. Dan's Western Wear is typical of western wear retail outlets. The industry is characterized by many independent regional shops. Frequently, these retail shops have been in operation for many years and have a multigenerational, loyal customer base. Recently, the online western wear business has shown some growth, but customers are primarily interested in facetoface shopping where they can feel the products, try them on and visit with locals who share their interests. Because these specialty retail outlets have relatively little competition from online and discount retailers, western wear stores have enjoyed relatively high profit margins for retail businesses. If managed well, these can be profitable stores. Joe West, a young entrepreneur who had worked at Dan's Western Wear prior to going to graduate school for a master's in business administration, saw an opportunity to consolidate western wear retail outlets to gain efficiencies. Thus, he founded Consolidated Western Wear Retailers CWWR and began purchasing profitable western wear stores, starting with Dan's Western Wear. He also assembled a management team to help him grow his business. As a new store is purchased, Joe and the management team study the store to learn how it is successful. Initially, they do not make major changes, keeping the same store name and encouraging the store to operate as before. Over time, Joe and the management team implement changes to improve profitability. Currently, CWWR owns retail stores, and Joe believes this is large enough to aggressively pursue efficiencies from consolidation.
a Put Purchasing Dept Cost on the Y axis for clarity.
b Consider the visualizations. Do you notice any outliers and can you explain them with case data? Should you do anything about them ie retain, adjust, or exclude Do any potential drivers appear more promising?
c Run the possible regression combinations ie all potential drivers at once and then each of the possible pairs Focus on the coefficients and consider what they are telling you. Which is best?
a What would you tell Joe about cost behaviors at the stores?
b What recommendations would make?
Consolidated Western Wear Retailers:
Regression Analysis to Understand Cost Drivers
in a Purchasing Department
Anne M A Sergeant, PhD CMA
School of Accounting Seidman College of Business
Grand Valley State University
INTRODUCTION
Dan's Western Wear began its humble roots on Main Street
in Sheridan, Wyoming, where Thomas George, a Greek
immigrant, settled his family in and began a cobbler
business that served ranchers, cowboys, and coal miners. Dan
George, Thomas' son, was nine years old when they arrived
in the United States and was soon active in his father's
cobbler business. Ultimately, he took over the business and
began to increase the store's inventory, creating the business
that is known today as Dan's Western Wear, which sells
quality boots, work clothes, western apparel, and jewelry to
just about anybody. Dan believes that if clothes can hold up
to a dusty hard day's work, and look great at the same time,
all the better. The company prides itself on quality clothes
with good oldfashioned service. Customers are greeted at
the door and helped throughout their experience. A visit to
Dan's Western Wear is like a visit to an old friend.
Dan's Western Wear is typical of western wear retail
outlets. The industry is characterized by many independent
regional shops. Frequently, these retail shops have been
in operation for many years and have a multigenerational,
loyal customer base. Recently, the online western wear
business has shown some growth, but customers are
primarily interested in facetoface shopping where they
can feel the products, try them on and visit with locals who
share their interests. Because these specialty retail outlets
have relatively little competition from online and discount
retailers, western wear stores have enjoyed relatively high
profit margins for retail businesses. If managed well, these
can be profitable stores.
Joe West, a young entrepreneur who had worked at
Dan's Western Wear prior to going to graduate school for a
master's in business administration, saw an opportunity to
consolidate western wear retail outlets to gain efficiencies.
Thus, he founded Consolidated Western Wear Retailers
CWWR and began purchasing profitable western wear
stores, starting with Dan's Western Wear. He also assembled
a management team to help him grow his business. As a
new store is purchased, Joe and the management team study
the store to learn how it is successful. Initially, they do not
make major changes, keeping the same store name and
encouraging the store to operate as before. Over time, Joe
and the management team implement changes to improve
profitability. Currently, CWWR owns retail stores, and
Joe believes this is large enough to aggressively pursue
efficiencies from consolidation.
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