(BDI) is an inventory distribution firm which confronted with considerable decline in its net earnings for the last three years. Though sales had risen consistently for the last 4 years, company’s CEO Alex Brunswick understands that it was only a…
Factors attributed to the current crisis vary. Brunswick Inc faces numerous challenges associated with marketing, finance, and operation. They include; 1) retailers’ interests to buy directly from manufacturers 2) growing direct competition from other distributors 3) manufacturers’ rigid attitude to credits 4) retailers’ delayed payments and 5) issues related to giving and taking orders.
Bradley Pulaski, the vice president of operations suggests expanding the service area across the Midwest because according to him, the company still gets service requests from potential customers of that region. However, it demands the construction of a new warehouse as distribution from the current facility will cause delayed deliveries. Bradley’s proposal would cost a total $12 million for property, plant, and equipment.
In contrast, Mariana Jackson, the vise president of logistic thinks that providing timely service is the vital part in order to retain the existing customers. It involves empowering the distribution system with web-based technology like call center and integrated information backup. He envisages that the improved system would make distribution more cost effective as it can save up to 16% in shipping expenses and 16% in labor expenses annually. Finding both options inappropriate to the situation, Alex Brunswick determines to use a 12% cost of capital as discount rate when making financial decisions.
Among the three options, Mariana Jackson’s suggestion seems more relevant to the case. If the firm’s information system is enhanced, it can avoid unnecessary delays in customer service and deliveries. Pulaski’s option flaws as it doubles company’s financial burden. Since the company is unable to give timely delivery, expanding its coverage to Midwest will cause more troubles.
In the same way, Alex’s decision is also not a sufficient strategy. Two things are ...
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