CASE 1.1 KIDDIELAND AND THE SUPER GYM KiddieLand is a retailer of toys located in the Midwest. Corporate headquarters is in Chicago, and its 70 stores are located in Minnesota, Wisconsin, Michigan, Illinois, Indiana, Ohio, Iowa, and Kentucky. One distribution center is located in Columbus (for Kentucky, Indiana, Michigan, and Ohio) and one in Chicago (for Illinois, Iowa, Minnesota, and Wisconsin). KiddieLand markets a full range of toys, electronic games, computers, and play sets. Emphasis is on a full line of brand-name products together with selected items sold under the KiddieLand brand. KiddieLands primary competitors include various regional discount chains. A comprehensive product line, aggressive pricing, and self-service have been key to KiiddieLands success. Donald Hurst is KiddieLands logistics manager. He is responsible for managing both distribution centers, for transportation management, and for inventory control. Dons primary mission is to make sure all stores are in stock at all times without maintaining excessive levels of inventory. One morning in late January, while Don was reviewing the new years merchandising plan, he discovered that starting in March, KiddieLand would begin promoting the Super Gym Outdoor Childrens Exercise Center. Don was particularly interested that the new set would sell for $715. In addition, the Super Gym is packaged in three boxes weighing a total of 450 pounds. Holy cow! thought Don. The largest set we have sold to date retails for $159 and weighs only 125 pounds. There must be some mistake, thought Don as he walked down the hall to the office of Olga Olsen, KiddieLands buyer for play sets. Olga was new to her job and was unusually stressed because both of her assistant buyers had just resigned to seek employment on the West Coast. As soon as Olga saw Don, she exclaimed, Don, my friend, I have been meaning to talk to you. Don knew right then that his worst fears were confirmed. The next morning Don and Olga met with Randy Smith, Dons transportation manager; A. J. Toth, general manager for KiddieLands eight Chicago stores; and Sharon Rabiega, Dons assistant for distribution services. Because the previous year had been unusually profitable, everyone was in a good mood because this years bonus was 50 percent larger than last years. Nevertheless, A. J. got to the point: You mean to tell me that we expect somebody to stuff a spouse, three kids, a dog, and 450 pounds of Super Gym in a small sedan and not have a conniption? Randy chimed in, Besides, we cant drop ship Super Gyms from the manufacturer to the consumers address because Super Gym ships only in quantities of 10 or more. Olga was now worried. We cant back out of the Super Gym now, she moaned. I have already committed KiddieLand for 400 sets, and the springsummer play set promotion went to press last week. Besides, I am depending on the Super Gym to make my gross margin figures. What about SUVs? asked Toth. They make up half the vehicles in our parking lots. Will the three packages fit inside them? By now the scope of the problem had become apparent to everyone at the meeting. At 3 p.m. Don summarized the alternatives discussed:

Purchase a two-wheel trailer for each store. Find a local trucking company that can haul the Super Gym from the KiddieLand store to the customer. Stock the Super Gym at the two distribution centers and have the truck that makes delivery runs to the retail stores also make home deliveries. Charge for delivery if the customer cannot get the Super Gym home. Negotiate with the Super Gym manufacturer to ship directly to the customer.

Everyone agreed to meet the following Monday to discuss the alternatives. On Sunday evening a record-breaking blizzard hit Chicago. KiddieLand headquarters was closed Monday and Tuesday because of the blizzard. The group finally met again on Wednesday. Don started the meeting. Okay, Don began, lets review our options. Sharon, what did you find out about buying trailers for each store? Well, Sharon began, the best deal I can find is $1,800 per trailer for 70 trailers, plus $250 per store for an adequate selection of bumper hitches, and an additional $50 per year per store for licensing and insurance. Unfortunately, bumpers on the newest autos cannot accommodate trailer hitches. Oh, no, moaned Olga, we only expect to sell 5.7 sets per store. That means $368 per Super Gym for delivery, she continued as she punched her calculator, and $147 in lost gross margin! Next, Randy Smith summarized the second option. So far we can get delivery within 25 miles of most of our stores for $38.21 per set. Actually, Randy continued, $38.21 is for delivery 25 miles from the store. The rate would be a little less for under 25 miles and about $1.50 per mile beyond 25 miles. A. J. Toth chimed in, According to our marketing research, 85 percent of our customers drive less than 25 minutes to the store, so a flat fee of $40 for delivery would probably be okay. Randy continued, Most delivery companies we talked to will deliver twice weekly but not daily. Sharon continued, The motor carrier that handles shipments from our distribution centers is a consolidator. He said that squeezing an 18-wheeler into some subdivisions wouldnt make sense. Every time they try, they knock down a couple of mailboxes and leave truck tracks in some homeowners lawn. Olga added, I talked to Super Gym about shipping direct to the customers address, and they said forget it. Whenever they have tried that, Olga continued, the customer gets two of one box and none of another. Well, Olga, Don interrupted, can we charge the customer for delivery? Olga thought a minute. Well, we have never done that before, but then we have never sold a 450-pound item before. It sounds like, Olga continued, our choice is to either absorb $40 per set or charge the customer for delivery. That means $16,000 for delivery, she added. One more thing, Don said. If we charge for shipping, we must include that in the copy for the springsummer brochure. Olga smiled. We can make a minor insert in the copy if we decide to charge for delivery. However, she continued, any changes will have to be made to the page proofsand page proofs are due back to the printer next Monday."

Questions:

1. List and discuss the pros and cons of the inventory Super Gyms at the distribution center, then have a truck that delivers from the distribution center to the retailer, and the Super Gyms are delivered to individual customers.

( please don't provide me with an answer that already post at chegg before, thanks)