SCM Case StudyKiddieLand & the Super Gym

BYManoj 09020241016

Problem Description

The problem discussed in the case study is a typical scenario wherein there is lack of communication between the sales people and the distributors of KiddieLand with respect to the Super Gym product which is to about to be launched. This product is large in size and much costlier as compared to KiddieLand other products.

The case study puts forth various alternatives for the distribution of the product with the aim to provide cost-effective delivery and minimize reduction in the profit margin. The advantages & disadvantages of each alternative are presented in this document.

Q1. List and discuss the advantages and disadvantages of purchasing a two-wheeler trailer for each store to use for delivering Super Gyms.

Advantages

Assuming that the product is a success, investment is useful for the long run, leading to cheaper and faster distribution.

The trailers can be used for distribution of products similar to SuperGym.

Also another alternative for cutting costs is to rent out the trailers when not in use.

Disadvantages

Incase the product is a failure due to high cost and bulky size, fixed investment cost on trailers (70 * $1800) and bumper hitches (70 * $250) is very high.

Continued variable costs of maintenance, parking space, license & insurance ( $50 per year) are high.

Reduced gross margin (loss of $14600) due to high delivery cost.

Q2. List and discuss the advantages and disadvantages of having local trucking companies deliver the Super Gym from the retail stores to the customers.

Advantages

Low cost of distribution for most customers (85% customers reside within 25 minutes drive from the store, approx. $40 delivery cost per set)

No initial investment

Disadvantages

Deliveries may not be made on the purchase date. (Delivery may be made maximally twice per week).

Price fluctuation in future due to economic factors like oil prices hike etc. may lead to increase in cost of distribution using this mode.

Profit margin will be eaten away by paying the charges for using the local trucking companies’ trucks.

Q3. List and discuss the advantages and disadvantages of stocking Super Gyms at the distribution centres, and then having the trucks that make deliveries from the distribution centres to retail stores also make deliveries of Super Gyms to individual customer.

Advantages

Reduced inventory at retail stores

Transportation costs are reduced as the same trucks make deliveries from distribution centres to both retail stores and also directly to customers.

Disadvantages

Inventory cost will be high at the distribution centres.

Also big delivery eighteen-wheelers are known to create nuisance ( they are known to knock down mail boxes and leave truck tracks in neighbours’ driveways)

Q4. List and discuss the advantages and disadvantages of charging customers for home delivery if they are unable to carry the Super Gym home.

Advantages

Significant reduction in cost by offloading delivery cost to customer.

Profit margin not affected by transportation costs.

Customer can order products on phone/internet and get home delivery (no need to drive to the retail stores)

Disadvantages

Customer may be dissatisfied with the delivery charges, which in turn may affect sales.

Q5. Which alternative would you prefer? Why?

We choose the 4 th alternative i.e. Charge for delivery if the customer cannot get SuperGym home.

Significant reduction in cost by offloading delivery cost to customer.

Profit margin not affected by transportation costs.

As customer need not drive to the retailer stores (save time and cost involved in drive of approx. 25 minutes), he would rather pay the delivery cost which is mentioned upfront alongwith the product price.

Customer can order products on phone/internet and get comfortable home delivery.

Why Other Alternatives are rejected

1st alternative: Very high investment on a product which might be a failure

2nd alternative: Deliveries may not be made on the purchase date. And also variable costs involved not desirable for the long run

3rd alternative : Eighteen-wheelers not feasible for delivery

5th alternative: issues with delivery to customers

Q6. Draft a brief statement (catalogue copy) to be inserted in the firm’s spring-summer brochure that clearly explains to potential customers the policy you recommend in question (5).

M.R.P (pickup only) $715Home Delivery Charges (Additional) $40Total (incl. delivery) $755

The Super Gym product is now available in stores for M.R.P. $715

(pickup only).

PS: For doorstep delivery, only additional $40 will be charged. Total price (incl. delivery) $755

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