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PHASE 2:

WRITE AN ANALYSIS regarding the following scenario:

You are an executive of a mid-sized consumer product industry. You are approached by a large brick and mortar retailer, to put a line of your products into their stores in the Southeast region.

This is an 11 state region with 250 retail locations, all in metropolitan areas. The customer is offering a one year contract to begin and agrees to pay in full (not on account) all inventory once received at the agreed upon price and trust your management of the inventory stock levels at their retail locations. (Meaning if you send it to them, they will pay for it)

1. You have been selected as the Program Manager for this project. Here is the data your customer and your internal groups have provided.

Requirement 1: Incorporate a SWOT analysis in your analysis and response

Requirement 2: Please include an executive summary to this section regarding your recommendation

1. The customer has received your pricing and requested / demanded at discount
2. The customer also expected you to manage the inventory in a VMI system
3. The quantity discounting will reduce your profit from $2.49 per unit to $1.74 per unit. The customers forecast shows projected annual sales of 1,100,000 with an error of + 10%.

You reach out to your internal departments with the Inventory Management request.

Here is the response:

1. Your engineering department has sent you a list of equipment including office equipment for your new team members at $250,000.00
2. Your HR department has sent the new headcount costs to you at $449,000 annually. Training to onboard this team is set at $57,600. This includes the expected fall out (attrition) rate from training and the associated rehire costs.
3. Your requests for data on 11 remote office locations has been returned from an outside real estate firm at $39,600.00. This includes data hook-ups back to the main office.
4. Travel from your remote office locations to the customers sites is estimated at $129,000.00. This estimate is based upon each location only being visited and audited 2 times per year.
5. Implementation and setup costs including travel at estimated at $250,000.00.

• Is this project going to generate any profit in the first year?
• What is the expected profit / loss at the end of the year?
• What is the payback period in months / do they expand beyond the 1yr contract?
• What is your recommendation, to accept or not accept the offer? Why?
• What effect does the +10% demand forecast error have on your recommendations?

2. Assume you have taken the contract and address the following situation:

Your program has had problems with system link-up and connectivity off and on for the past month.

While there are no customer complaints to date, sales have some concern with the accuracy of the inventory numbers. Purchasing has also noted fluctuations in raw material expenditures and shipping costs to the customer.

During implementation you developed a relationship with a temporary labor agency that supplied temp labor to each location at a cost of $15/hour with a minimum of 4 hours billed. This does not include any costs for travel from your team to supervise.

The customer also introduced you to a company they bring in twice per year per location to do an inventory for tax purposes. You have contacted them and they would charge $1000.00 per location to give an accurate inventory, this cost includes manpower, travel and a one day turn around on data.

• What do you recommend as a course of action and why?

3. Address the following ethical dilemma - You are at the end of the third quarter, Sales has announced that your company needs to increase shipping 10% to the customer for the last quarter for your company to make its financial forecasts and budgetary commitments. You realize that your agreement with the customer is they will purchase any inventory you send since they are trusting your VMI system.

• What do you recommend as a course of action and why?