Nittany Products: A Sequel

Nittany Products produces a variety of outdoor grills for private households as well as for commercial use. The business was started by Nick Shannon as a hobby. Nick Shannon liked to cook and particularly, liked to do outdoor cooking on a grill. The size of the groups that he entertained kept growing as his barbeques became almost legendary. During this period, Nick became very dissatisfied with his standard size grill that had been purchased at the Pleasant Gap Hardware Store. Being a metal fabricator by trade, he decided to build his own larger grill in his garage shop. Like most prototypes, it did not meet all of Nicks expectations, and he built additional versions until he was satisfied. His guests and neighbors were intrigued with his grill and asked him to build them similar grills. The number of requests were small enough that he could produce them in his garage. Nick estimated that he might receive 20 requests per year, which was manageable. When the requests reached 50 per year, he realize that he could not satisfy the demand using his garage shop. It was too small and precluded options to operate more efficiently So, Nick borrowed money from the local bank using his home for collateral and rented a nearby abandoned service station. He also purchased new tools and equipment and hired students from the local vocational school to work part-time during the school year and full-time in the summer to meet peak demand. His decisions resulted in much more business and lower production costs.

The success lead them to consider expanding their market area in central Pennsylvania. The population of the area had expanded significantly over the last 10 years since Nick initially began to build and sell grills because of the improved highway system and the growth of the nearby University. Nittany Products, to this point in time, had built the grills to customer needs, and shipped them assembled to customer locations when requested in 1520-foot vans that they leased. Customers also had the option of picking up the grills themselves to eliminate the delivery charge. Nick needed to rethink the approach to production, marketing and logistics with an expanded market area, a much larger potential volume of sales, and an expanded product line.

Nick felt that it was more economical to ship the grills unassembled and have them assembled at the delivery point. He also recognized that home owners and restaurant owners could be challenged to assemble the grills especially since these were larger grills available with a variety of fuel options. He assumed that they would need to make deliveries in trucks with a driver who could efficiently assemble the grills for customers onsite. Such a strategy would require premium pricing and specially trained drivers. Nick and his daughter, Tracie, who joined her father in the business to manage the delivery service, felt that the delivery option offered a value added service that could enhance sales especially for their commercial customers who purchased larger, more expensive grills usually for their restaurant operations. They believed that they could sustain a private fleet with the expanded sales and market area.

You have been hired by Nittany Products to develop a report presenting them with the advantages and disadvantages of offering customers delivery service as well as the special issues and challenges that their type of business would face with private transportation service. Based upon your discussion would you recommend private transportation service or some other option for delivery?