Case Study Two: SleepSuccess Ltd SleepSuccess Lid (SSL) is in the business of designing and manufacturing bedsheets for sale in departmental stores as well as for hotels. The Business Processes SSL has a team of designers who design the graphic images on the bedsheets. Some of these designers are among the best in the industry. They will create a design and pass it to the marketing department to promote it to the customers. The marketing team will email, on a monthly basis, a catalogue that contains bedsheets with the latest design to all the customers, and orders will be taken prior to the production of the bedsheets. A newly emerged market segment is interior designing (ID) firms locally. These ID firms have some big clients. SSL offers tailor-made design for the bedsheets for the clients of these ID firms, with premium pricing. So far, the feedback from the ID firms concerning the quality of the design were encouraging All customers can place an order by emailing an order form, that can be obtained from SSL marketing department, to SSL. Once the order is received, the marketing department will liaise with the production department on delivery details. The production department needs to liaise with the logistic and shipping department on all shipment details before the information can be channelled back to the marketing department. Such communication sometimes caused unacceptable delays in reverting to the customers. There were occasions where customers decided to cancel orders due to the slow response from the marketing department. As part of the business expansion strategies, SSL has some arrangements with a few departmental stores overseas where the bedsheets are sold on consignment. SSL will store the bedsheets at the departmental stores and will only invoice the departmental stores when it is sold. However, if the bedsheets remain unsold for 120 days, SSL will invoice the departmental stores on these bedsheets. SSL will bear all inventory losses before the bedsheets are invoiced. Debris from the Production of Bedsheets The production processes involved the use of rolls of fabric that will be cut into the sizes of bedsheets. SSL has leftover fabrics from the cutting of bedsheets and this represents 5% of thetotal input fabric. These debris are sold to a nearby factory where it will be used as fillings of soft toys. Customer Profitability Analysis (CPA) The accountant of SSL has conducted a customer profitability analysis for the two market segments based on the last financial year ended 30 June 2020. The CPA and other relevant information are as follows: Departmental store segment Hotel segment Number of customers 23 17 $ Sales revenue 380 000 247 600 Cost of goods sold 160 000 124 000 Gross margin 220 000 123 600 Selling and administrative costs: General selling costs 48 300 35 700 General administrative costs 38 000 32 000 Customer-related costs: Sales activity 16 000 12 000 Order taking 6 000 8 000 Special handling 80 000 60 000 Special shipping 18 000 20 000 Total selling and administrative costs $206 300 $167 700 Operating profit $13 700 344 1min Customer-driven activities Cost driver Activity rate Special handling Units handled $100 Special shipping Shipments $1,000 Sales activity Sales visits $2,000 Order taking Purchase orders received $400Customer-driven activities Departmental stores Hotels segment segment Sales activity 8 sales visits 6 sales visits Special handling 800 units handled 600 units handled Special shipping 18 shipments 20 shipments Order taking 15 purchase orders 20 purchase orders Explanations on Customer-driven Activities The purpose of sales visit to the customers was to obtain feedback on the products and, in the case of the departmental stores, to find out how the bedsheets were displayed in the stores. Special handling involved any specific way of packing requested by customers. These may include packing in different sizes to suit the shipping space or the use of better quality of packing materials to prevent damages caused by poor handling. Special shipping was normally requested in order to expedite the product delivery in order to meet an expected increase in demand due to, for example for a festive season, or shortage of bedsheets in some cases due to poor inventory planning by the customers