Parts Warehouse Company Presentation
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Transcript of Parts Warehouse Company Presentation
PARTS WAREHOUSE COMPANY- An Automotive parts Distributer
Group 7
UM14313 Ashutosh PatnaikUM14318 Dhruv SatijaUM14319 Divya JenaUM14320 Isha Upadhyaya UM14321 Kanakesh GuptaUM14322 Kanumury Akshita Taruni
Parts Warehouse Company – Company History
Parts warehouse company is an automotive parts distributor
Founded by Roger Corn in 1955
Operating out of a medium-sized Midwestern city
Dominant auto-parts wholesaler by 1970 – Focus on customer service and building inventories
Problem Statement
Company’s growing cash flow problems even though sales revenue was increasing year-on-year
Problems arising out of certain sales and marketing policies that had been instituted with the hope that PWC could provide faster and complete service to its customers
Changing the system of compensation and incentives to keep the sales-force motivated
Stage 1
•National automotive parts manufacturers
Stage 2
•Wholesalers like Parts Warehouse Company
Stage 3
•Retail auto parts Outlets and repair shops
Warehouse Operation
PWC employed 28 people - 4 salesmen with designated territories & others worked in the warehouse in fields like order packing, delivery, management, etc.
Inventory turnover ratio went down from 6.1 on net sales of $2.1 million to 4.3 on net sales of $2.4 million in 3 years. Little effort was made to keep track of requests
Liberal returns policy - average of 15 % returns of sales: Free return policy with no penalties imposed
Increased collection period – Could not avail the 2% discounts offered by manufacturers for early payments
Front counter system – To handle emergency orders: Differentiated PWC from its competitors Buyers preferring to frequently telephone for smaller quantities throughout the day Buyers tended to stock fewer: Personnel cost of fulfilling these smaller orders was higher
Industry Structure & Trends
Market for auto parts had demonstrated impressive growth in recent years
Inflation and recession prompted customers to delay the purchase of new vehicles in favour of fixing their old vehicles
Inflation was expected to continue or worsen, promising continued growth of the auto parts market
Sales Organisation
4 sales personnel
3 sales persons covered immediate metropolitan area –
80% revenue
1 sales person covered outlying
regions
Sales Personnel Responsibilities
Responsibilities
Call each account
Maintain inventory
Establish new accounts
Cash Flow and Profits declining• Average collection period increased resulting in cash flow problems,
not able to take advantage of manufacturer’s discount for early payment.
Decline in inventory turnover rate• Stocking items that had been purchased in the past year, not keeping
updated on new requests/demands in market and liberal returns policy.
Inability to predict forecast• Large number of small orders required more personnel to fill them than
when fewer numbers of large orders which was making forecast prediction even complex
Management of sales force and compensation plan• Sales personnel were under forced and not motivated, not promoting
products to current and potential customers.
Inability to expand market • Priced strictly according to manufacturer’s price sheet, two other
discount auto parts wholesalers in the market, widely dispersed outlying region accounts.
Problems
Solutions
1. Why was cash flow and profitability declining?
Credit Payment• There was a shift in the payment mode from cash to
credit . As the average payment period increased, PWC could not avail the benefit of 2% discount on early payment from its manufacturers.
Return Policy• PWC maintained a liberal returns policy. There was
no penalty levied for returns. There would be cases where customers purchase parts on credit and return back before the credit period which was also a major problem for insufficient cash flow
Solutions
2. Why was inventory turnover continuing to fall?
Solutions
3. How could the company forecast future demand for PWC products?
The forecast can be carried out at both macro and micro levels
Macro-Level:First, we make an estimated growth of the spare parts industry w.r.t inflation and recessionNext, we predict PWC’s market share in the scenario by extrapolating its growth over the years
Micro-Level:This is to forecast the quantity and variety of parts to be stocked. Since the earlier practice of using historic data is obsolete as the customer needs are changing, we propose “market research” for understanding new trends. In market research, we float questionnaire about the customers buying preferences and collect the data from the entire customer base served.Once the data is obtained, it is analysed using an appropriate data-analytics tool. The inventory can now be stocked according to the results generated.
Solutions
4. Why were PWC sales man no longer motivated to push their products in an effective, professional manner as they once had?
Compensation
• Sales personnel were paid for any sales coming from accounts in their area
• As a result, they were simply taking orders rather than aggressively promoting sales
Grievance Handling
• The company should have handled Richard Zeigler’s issue in a more innovative manner without affecting the sales income of the best salesperson
Solutions
5. How should the company approach its growing market? Should the company aim to increase market share in its present market or work at penetrating markets in other
areas?
The company should focus on increasing its present market. This is because it is stated that there are few key account customers in other regions and are very dispersed.Strategies for approaching growing market:
These steps will help in improving the current standing in terms of location, service and price
Increasing man power:• The overall man-power handling front end and back end should be increased to increase the
efficiency of delivery
Increasing frequency of delivery:• It has been noticed that customers come to the front counter as the delivery frequency does not
match their demand.
Incentivising customers who pay in cash:• Since we can avail 2% discount from manufacturers for on-time payment, we can offer customers a
1% discount for paying in cash.
Solutions
6. How about the compensation plan?
Minimum pay
• There should a minimum base salary for all employees
Incentives
• The compensation plan should incentivize orders above a set sales target
Rewards & Recognition
• It should also reward the sales people for adding new accounts
THANK YOU