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Dae a aS SS SS SS Tee ee Statistika Bisnis dan Industri COMPUTER DATA BASE EXERCISE HH INDUSTRIES COMPUTER DATA BASE EXERCISE - 1 HH INDUSTRIES Une ieeeeenieeenemeeemeeeememeememmente ; ! : “Everybody, this is Laurel. Laurel [ McRae,” Hal Rodgers, president of HH Industries, announced at the j weekly staff meeting. “Laurel, this is Stan Hutchings, Vice President in | charge of Sales; Pegey Noble, Manager of Ac- counting and Data Processing; Bob Ritchie, } Manager of Purchasing and Inventory Control; and Gary Russell, Operations Manager. } “You all know HH Industries is doing well,” Hal continued, “The last three years have reflected J market stability and promising growth in a number of areas. However, much of what we 1 currently base our decisions on is our collective 1 1 i 3 i years of experience and gut feel. Laurel is an experienced data analyst and strategic planner and is joining. our team to help us analyze, in a more quantitative, statistical fashion, where we are now and where we hope to be in a few years. We may be good, but I fee! that with some sophisticated marketing and analysis strategies, we have a tremendous future ahead of us. Besides, maybe we can finally find a productive use for some of this, paper we generate!” The staff chuckled. If the company didn’t D prosper, it wasn’t due to a lack of data. Since the introduction of a tailored data processing program in the previous fiscal year, a plethora of data, some usefull and some merely confusing, had been 3 available. Daily sales and margin (profit) figures were kept religiously, along with detailed inventory D data and manifest (shipping) data. No one had quite figured out what to do with it all yet, though B the president and his staff kept track of simple figures of merit. : 3 “Back in her office, Laurel contemplated her recent move to the Florida Suncoast headquarters © of HH Industries from the Rocky Mountain home of her first position with Cold River Toy Com- B pany. She wasn’t too sure about the president's use of “experienced,” but she'd do her best. Her B decision to leave the successful sled and toy man- ufacturer had been difficult, but she was confident Bi that warehousing and distribution firms, like HH. aUageaeubl Industries, were a solid bet for the future. And Laurel had been impressed during the interview process with both Hal Rodgers‘and the company’s, positive, efficient atmosphere. Soon enough she'd know if she liked the hydraulics industry as much as she had liked toys. “Get to know us,” Hal had said. “My staff is completely available to you. Ask questions, get a look at the data we collect. I'm a little new at exactly where statistics will help us, but I have full confidence in you. You come very highly recom-, mended, both as an analyst and as an innovative thinker.” “Well,” Laurel thought, “here goes nothing.” First stop, an afternoon with Stan Hutchings for some company background. Stan, she knew, had been with HH Industries longer than any other staff member and had an excellent intuitive feel for the hydraulics industry. Days later, and after several such familiarization meetings, the data had already started to clutter her once empty desk. Laurel reflected on what she had learned. HH Industries had the typical profile of a family-owned business. Established more than 20 years before by the Douglas family, Handy Hydraulics (as it was then known) sprang up to fill a need perceived by its founders—a source of spare and repair parts to the rapidly growing mobile hydraulics industry. The booming popula- tion of the 1960s required the support of an increasing number of construction vehicles, gar- bage trucks, and other large pieces of equipment which, in turn, required spare and repair parts for a huge variety of hydraulic seals, pumps, cylin- ders, gauges, etc. As a distributor, Handy Hydrau- lics tracked down part sources and either resold directly, under the manufacturer's name, or packaged individual parts into repair kits for resale under its own name. The first 5 years of business saw steady growth, though little actual marketing was done. Word-of- mouth and an important market niche provided a healthy atmosphere for the company. Early sales were almost exclusively within Florida and it wasn't until after the first catalog was produced in 1974 that business bevan to spread northward to Alabama and Georgia “Brute-force” marketing was the next step, and Laurel, grimaced as she thought of the poor secretary who had had to distribute mailers to Prospective Customers gleaned from the yellow | ages of all the communities, nationwide, of over 25,000 people. The philosophy was simple: Where there are large groups of people, there are garbage trucks and construction equipment which support these communities. And it worked. The late 1970s and the early 1980s saw burgeoning growth, as new customers appeared daily. Unfortunately, and yet typical of family-run companies, management Just couldn't quite keep up. By this time, numerous competitors had sprung | up throughout the United States, some of whom had originally been customers of Handy Hydrau- lics. It became apparent that the company’s goals of maintaining nationwide prominence could only be served by opening satellite warehouses else- where, from which the company’s emphasis on next-day service could be continued, cost-effec- tively, to all areas of the country. To achieve this end, the Douglas family sold Handy Hydraulics to its present parent company, BMP Enterprises, and Mr. Douglas was given a 3-year contract to ' remain on as president, With additional capital provided by the investment firm, warehouses were opened in Arizona (1985) and Ohio (1986). However, the company was kept on tight reins by the original founder, with little thought given toward how best to manage the satellite ware~ houses. Similarly, no recognition was given to the importance of the changing business environment (increased competition, new technologies and management strategies available, etc.). The result was a business out of control, suffocating itself by once-proven, but now too inflexible, policies and procedures. Something had to give. ‘That something occurred when Mr. Douglas retired in 1988 and BMP Enterprises brought in Hal Rodgers to try to save Handy Hydraulics. A solid business executive with good intuition and even better “people skills,” Hal inherited a company that was operating by the proverbial seat ofits pants. While averaging over $900,000 in sales per quarter, outrageously high payroll and operating expenses were causing net losses. a G Fnetustral Statistics a E Over the next 3 years, significant changes were introduced which succeeded in increasing sales while holding expenditures down. The payroll was trimmed to a bare minimum and a walk-in parts {J counter, once useful for public relations but now merely a costly burden, was closed. Toll-free customer order numbers were installed. The Ohio warehouse was closed down and, nearly 2 years J later, a streamlined version was reopened in Pennsylvania. The company’s catalog, previously & consisting of two bulky 3-ring binders which had to be kept updated by continual mailings, was J downsized to a “throwaway” version which more clearly and concisely represented the company's products. Finally, to publicize and celebrate the company’s new image, the name was changed to & HH Industries. This was the organization which Laurel found herself contemplating, She summarized the current structure: three profit centers (Florida, Arizona and Pennsylvania); three product lines (seals and scal kits, finished hardware —cylinders, § pumps, valves, etc. —and spare/repair parts). The company had 42 full-time and nine part-time employees, over 3000 active customer accounts, and approximately 15,000 line items of inventory. & The corporate fiscal year ran from December to November, and quarterly sales figures now averaged close to $1.4 million. “Whew,” Laurel muttered to herself. “Slightly different from toy manufacturing! But I'm getting paid to be a statistician and analyst, so let’s see if I can sink my teeth into this monster.” Laurel extracted the most current year’s worth & of sales data (the third and fourth quarters of 1990, and the first and second quarters of 1991), both the number of orders per day and the dollar value of those orders (referred to as ‘‘sales”), by profit center. These are given in the following table. From what she had seen, the entire com- pany’s mood seemed to revolve around what was termed the “daily figure” — total corporate sales each day. Laurel's experience, however, told her to look a little deeper. She knew, for instance, that total sales dollars were the direct result of two factors: the number of orders per day and the average dollar value per order.