Parts Warehouse Company Presentation

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PARTS WAREHOUSE COMPANY - An Automotive parts Distrib Group 7 UM14313 Ashutosh Patnaik UM14318 Dhruv Satija UM14319 Divya Jena UM14320 Isha Upadhyaya UM14321 Kanakesh Gupta UM14322 Kanumury Akshita Taruni

description

Presentation on the Sales and Distribution Case Study of Parts Warehouse Company - case facts, their analysis and answers to questions at the end of the case

Transcript of Parts Warehouse Company Presentation

Page 1: 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

Page 2: Parts Warehouse Company Presentation

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

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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

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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

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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

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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

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Solutions

2. Why was inventory turnover continuing to fall?

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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.

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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

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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.

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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

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THANK YOU