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Allied Office Products Case Presentation v2

Allied Office Products Case Presentation v2

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07/16/2013

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Profitability Study

for the Business Forms Division of Allied Office Products

February 9, 2007 Proposal Team: Brant Allegretti, Kirk Blackwelder, Rick Calero, Mary Coffee, Jonathan Doddridge, Mike Taylor, Carlos Villarreal

Overview
       

Background Goals and Objectives Options Situation Analysis Activities Based Cost (ABC) Analysis Potential Threats / Risk Mitigation Recommendations Summary
Allied Business Forms Division 2

February 9, 2007

Total Forms Control (TFC) Warehousing Inventory financing Forms usage reporting Inventory control Distribution (Pick pack & desktop delivery) February 9.Background   Annual sales of $900 million Forms Manufacturing Business forms Specialty paper  Business Forms Inventory Management Services . 2007 Allied Business Forms Division 3 .

cost of capital for inventory & freight expense (based on 1990 aggregated financial data)  Profit Margin Sales force charges average of 20% of product & services. 2007 Allied Business Forms Division 4 . individual accounts can vary from standard formula February 9. regardless of level of service Covers warehousing.2%.Background  TFC Inventory Storage 10 distribution centers  Pricing Clients charged flat monthly fee on product cost plus 32. distribution.

TFC Industry Chain Trees Pulp Paper Forms Mfg.Background Value Chain Concept . 2007 Allied Business Forms Division 5 . Forms Sales TFC Customer Purchasing Manager Customer Receiving Forms User The TFC Chain Storage & Inventory Financing Requisitioning Stock Selection & Pick Pack Order Entry & Billing Desk Top Delivery Freight February 9.

2007 Allied Business Forms Division 6 .Goals & Objectives    Review Current State Identify Areas for Improvement Increase ROI on TFC from 6% to 20% February 9.

Storage & Inventory Financing “Don’t you think we should do something to get that old inventory moving?” --Tim. MO Distribution Facility    Inventory Obsolescence Excess Inventory Cost of Capital Customer does not pay for inventory until requisition submission February 9. Kansas City. 2007 Allied Business Forms Division 7 .

that all the order information is easy.incorporate purchase history in requisition process. under $X.Requisitioning “I’ve gotten to the point where I know the customers so well. extra fee charged Allied Business Forms Division 8  February 9. The only thing that really matters is how many lines I have to enter. 2007 .5 lines Reduce data entry .000 requisitions per year Each requisition – average 2. determine frequent reorders Institute minimum requisition requirements.” Hazel Nutley. Data Entry Operator    310.

Stock Selection / Pick Pack “Almost is everything pick pack nowadays.” --Rick Fosmire. No one seems to order a carton of 500 items anymore. Warehouse Supervisor 90% of all orders are pick pack  Reduce pick pack orders: Work with Allied to reconfigure cartons to meet top 40 accounts buying patterns  February 9. 2007 Allied Business Forms Division 9 .

Order Entry & Billing Ensure requisition process /order entry / billing is a one-step process  Goal: Reduce redundant data entry  February 9. 2007 Allied Business Forms Division 10 .

no extra charge to clients for this time intensive activity Implement desktop delivery fees February 9. 2007 Allied Business Forms Division 11 .Desktop Delivery   Currently.

Freight   Cost coverage set fee is not equitable across customer base Implement pass-through freight cost leveraging new computer system February 9. 2007 Allied Business Forms Division 12 .

Activity Based Cost Analysis Activity and Cost Drivers Activity Storage Cost Driver Number of Cartons Activity Based Cost 1.250 Total 5. 2007 Allied Business Forms Division 13 .801 Basic Warehouse Stock Delivery Number of Requisition Lines 0.761 Pick Pack Number of Pick & Requisition Lines 0.734 Data Entry Number of Requisition Lines .612 Desktop Delivery Number of Desktop Deliveries .550 Requisition Handling Number of Requisitions 1.708 February 9.

2007 Allied Business Forms Division 14 .Activity Based Cost Analysis February 9.

Activity Based Cost Analysis Individual Customer Profitability February 9. 2007 Allied Business Forms Division 15 .

2007 Allied Business Forms Division 16 .Activity Based Cost Analysis Impact to Bottom Line February 9.

2007 Allied Business Forms Division 17 .Recommendations Activity Based Management (ABM)  Management Philosophy     Focus on cost reduction Make informed decisions Create & maintain a competitive advantage Reduce non-value added activities February 9.

Recommendations Supply Chain Management (SCM)  Optimize Warehouse Space Reconfigure aisles Consider consolidation of DC’s for TFC LOB  Optimize Customer Inventory Levels Incorporate Just In Time Inventory (JIT) System with Allied (for 179 customers that represent 72% of sales) February 9. 2007 Allied Business Forms Division 18 .

2007 Allied Business Forms Division 19 .5%/mo.Recommendations Activity Based Costing (ABC)   Storage & Inventory Financing Charge 1. for on-hand inventory > 9 months February 9.

Preferred price list at __% of retail 2.Recommendations  Establish Preferred Vendor Price Strategy (PVPS) with Allied 1. Eliminate sales force outsourcing option    Engage Fiveandone for Competitive Market Analysis (CMA) Implement Services Based Pricing Structure If CMA reflects optimal market timing. 2007 . implement Supply Chain Management Plan Allied Business Forms Division 20 February 9.

2007 Allied Business Forms Division 21 .Potential Threats  Stakeholder Acceptance Will the sales team perceive plan will decrease commissions?  Customer Acceptance Will customers view this positively or negatively?  Competition Market Timing Response to our new strategy February 9.

Understand competitors’ past. present (and most importantly) future pricing strategies 3. Provide basis to develop strategies to achieve competitive advantage in the future 4.Risk Mitigation  Get Our Sales Team On Board! 1. insert verbage  Understand Our Competitor’s Position 1. Train account managers thoroughly on client benefits  Make Sure Our Customers Understand Our Value Proposition 1. 2007 Allied Business Forms Division 22 . Predicted competitor response to new pricing strategy February 9. Competitive advantages/disadvantages 2. Prepare account analysis for each account manager 2.

Summary Allied Philosophy “We know what you need… the right product at the right place at the right time.” Preferred Vendor Price Strategy + Competitive Market Analysis + Distribution Optimization Plan = Allied Business Forms Division Success! February 9. 2007 Allied Business Forms Division 23 .

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