Project instructions:
This case is about Radioshack.
For this, I only have written the first part(Problem, attached), and I will write the Analysis and Recommendation. You only need to write the Justification.
GM.docx just is an example.
RadioShack
Problem:
RadioShack was started the business in 1921 by two brothers, who wanted to provide equipment for the then-nascent field of amateur, or ham, radio. They chose the name “Radio Shack”, which
was the term for a small, wooden structure that housed a ship’s radio equipment. The company began their first category in 1939, which for the high-fidelity music market. RadioShack began it’s
own private-label products in 1954, named Realist. However, the company fell on hard times in 1960s, because they expanding to nine stores plus an extensive mail-order business, and Charles
Tandy bought the company for $300,000.
After Tandy corporation bought the company; they changed the name to Tandy Radio Shack & Leather because Tandy Corporation was originally a leather goods corporation. In May 2000, the
company dropped the Tandy name, instead opting for RadioShack.
In 2008, RadioShack reported net sales and operating revenues of $4.81 billion. On July 21, 2009, RadioShack announced a partnership with T-Mobile USA, and started the service in August 2009,
and they finished the partnership at September 15, 2011. As of 2013, RadioShack was one of the top retailers in wireless offering AT&T, Sprint, Verizon and Boost Mobile phone and carrier
options.
RadioShack’s current proprietary brands include RadioShack’s branded products, and AntennaCraft, Auvio, Enercell, Gigaware and PointMobl. Now, RadioShack is a leading national retailer of
innovative technology products and services, as well as products related to personal and home technology and power supply needs. In April 2012, RadioShack had released very poor first
quarter 2012 results, and on April 14, 2012, the stock sank to an all-time low early in the day’s trading, and on July 11, 2013, the stock price sank again. On March 4, 2014, the company announced
a net trading loss of 2013 of $400.2 million, which above the 2012 loss of $139.4 million. They decided to close nearly 20 percent or 1,100 of its outlets, and they were considering other ways of
restructuring the business. At 2014, RadioShack’s revenue was down 13% compared to a year ago, and the stock is down more than 45% this year and has lost 90% of its value over the last five
years.
We think the problem of RadioShack is that no one wants to buy their products online or at the stores, because most customers do not have any images about their company, and some people
even do not know what is RadioShack, and where is the store. If customers want to buy an electronic product, most of customers would choose Best Buy, or buy it directly from Apple Store.
Analyses???
Recommendation???
I haven’t really written it yet. But I am going to talk about a five step plan. 1. Cut costs (haven’t figured out where I’m cutting costs yet) 2. Reorganize and restructure stores focusing on our
best selling products 3.create a new customer service system 4. Raise awareness about the diversity of products we sell 5. Start a new advertising campain on how RadioShack is updated and
high tech with great customer service, primary focus on using the television (Tied into step 4)?5????!!
Green Mountain Coffee Roasters Case Analysis
Problem:
Green Mountain Coffee Roasters has been experiencing issues with the quality of our reported earnings. Supporting this we see that the company did more transferring of inventory than actual
shipping itself. Our products often transferred from one company warehouse to another warehouse in a nearby location. This meant we were recording sales when we should not have been. We
also experienced problems with external inventory. Available space on the warehouse floor was limited as a result of poor inventory management, forcing products to be often pre-loaded onto
trailer trucks in order to clear room on the warehouse floor. This method was often seen before an audit, reducing inventory stored in the warehouse by as much as 50%. Inventory would be
processed as an order to create deception to auditors. In the end many of these products were restocked after the audit. This causes the actual inventory to be significantly larger than the
inventory audited.
Another major outcome of poor inventory management was that one-third of Green Mountain’s warehouse space was occupied by expired inventory. One of the main reasons of the expired
inventory is because of improper data collection. Having a large inventory carrying cost and a large inventory of expired goods turns into a major expense for the company. Green Mountain
Coffee Roasters also experienced a problem with the high price of their goods. If we do not solve the high inventory expense problem, it will prove to be difficult to reduce the price of the
products. If we could better manage the inventory, it will help Green Mountain reduce the cost and increase profits.
Green Mountain Coffee Roasters faces a major problem with their inventory management. Changing the way we control inventory could result in a significantly higher net income, which is why it
will be important to develop and enhance it going into the future. The company could encounter several negative outcomes if they continue down their current path. The worst case scenario if
they continued this trend would be that they incorrectly record their financial well-being resulting in substantial inventory costs and losing faith from shareholders due to the distorted data. If
the way we monitor our inventory does not change, we forecast that we could overproduce and waste over 32 million units of product in the upcoming year.
Analysis:
After conducting an extensive S.W.O.T. analysis of Green Mountain Coffee Roasters, we identified a major weakness in the way the firm manages inventory. As a consequence of this weakness the
company experienced overproduction, which eventually led to massive amount of expired products. We concluded that this issue is likely due to incorrect forecasting made from inaccurate
data provided by the inventory management team. Such forecasting methods led to an overestimated demand, creating an excessive leftover of unsold products and resulted in large amount of
expired products due to the product’s short shelf life. Based on an ex-employee’s estimates “On average, at least one-third of the space in Green Mountain’s warehouses was occupied by expired
products”. This issue would not only weigh down the profits earned by the company due to the large amount of expired and unusable products, but also causes the company to incur a higher
than normal inventory carrying cost which, further drags down on the company’s profit.
A major factor, which eventually led to such overproduction, is likely to be caused by resistance to improve operations through the use of new technology. As competitors evolve their
business by adapting standardized IT systems, Green Mountain Coffee Roasters maintained their sub-standardized systems. Tasks performed by the inventory management team were
accomplished using Excel spreadsheets, which provided non-standardized analysis and were extremely vulnerable to material errors. Such errors would undoubtedly have played a role in any
miscommunication between the inventory management team and production management team, leading the production team to produce more products than necessary with the inaccurate and
non up-to-date information.
Additional issues due to overproduction of the company’s product developed as employee ethic came into question. There have been instances when truckload of products would be pre-loaded
for retailers right before an audit due the shortage of warehouse space only to have the products be return to the warehouse after the audit, avoiding be counted. These conducts can create
extreme misleading information between other departments of the company as it will provide them with incorrect data and further restraining their ability to make the most appropriate
decisions.
Based on past data, excess inventory has considerably increased from year to year. For the quarter ended in 9/24/2011, inventory increased by 156% compared to the quarter before.
To emphasize the extent of the issue of overproduction for Green Mountain Coffee Roasters, in the past several years inventory turnover rate has drastically decreased from 9.8 in 2004 to just
3.4 in 2011. This value is significantly lower than some of the industry’s top competitor such as 5.12 for Starbucks and 6.07 for Dunkin’ Donuts in 2011 and shows the increase in difficulty for
Green Mountain to recycle through their inventory.
Recommendation:
Through much analysis we decided that the most threatening problem to Green Mountain Coffee Roasters was poor inventory management. Poor inventory management has led to the
overproduction of our goods and inventory. Too much uneccesary inventory has proven itself to be a major disruptor to our company’s progress and future growth. We have addressed this
issue and have come up with multiple solutions to fix the problem. The main recommendation we are suggesting is to update the current IT system.
A major reason why we are overproducing is because our IT system is not advanced enough to keep track of inventory. The company should standardize the IT system because the current
system is too susceptible to error. This is why we propose to implement software such as Microsoft Access which will create a more organized and productive system. Using Access will help
keep track of all the inventory and shipments in a way that our previous system could not.
We will implement the software into every factory and warehouse in order to ensure competency across the board. This task should prove to be very manageable considering many of the
computers in our system already have this software embedded in it. Installing the software is only one of the major aspects of the project though. It will be equally important to make sure that
management and employees are proficient in the use of Access. This will entail for Green Mountain Coffee Roasters to set up training sessions for all those that the new software will apply to.
The training system will consist of two weeks of training for a total of 12 hours. A quick training course will most likely create some intimidation and initially deter employees away from the
software. We beleieve though that with exposure to the software through training, they will have little difficulty adjusting to another Microsoft application. A similar situation was proven in
2010 when Green Mountain Coffee Roasters experienced rapid growth and needed more employees to support demand in North America. They had a training program called ‘Career Readiness
Program’. Employees responded to the training program very positively with 86% of all participants believing the program helped improve their ability. This gives us confidence that our
employees will accept and excel in the training program because they know how great the outcome may be.
In terms of expenses, this project will be a small drop in the bucket. We project that with the new software and training of employees, we will spend around $6.8 Million on the project.
Considering how the company earned over $199,500,000 in 2011, this will be a small but necessary expense. We believe that we will gain shareholder confidence from this investment. They will see
that we are taking action against our previous mishandling of inventory and also see the capital benefits of the investment. This project will create a more organized system that will eliminate
deceptive inventory readings and false shipments creating more investor confidence. Confidence will also be instilled with the combination of less waste, a higher turnover rate and increasing
growth in revenue. For these reasons and more, installing Access can be a financially and socially smart investment.
Justification:
Even though Green Mountain Coffee Roasters has had significant growth over the years, its recent mishandling of inventory due to inappropriate management decisions poses a major threat to
the company in the near future. The company has consistently struggled in keeping their information aligned between different departments due to the use of sub-standardized IT system such
as Microsoft Excel. Such deficiencies emphasize the importance of standardized IT systems such as Microsoft Access. Adapting a standardized system would resolve this problem by providing
two primary benefits: enhanced communication between company departments and providing a stronger control over inventory.
Under the current IT system, Microsoft Excel has been extremely vulnerable to material errors. In order to overcome these deficiencies, implementing a more effective system such as Microsoft
Access would allow the company to synchronize its data between each of our departments. Under this strategy, each department would be able to view that same information at any given
moment, reducing the chances of any miscommunication between the departments and allows the operations of the company to run a lot smoother. This improvement plays a vital role for
departments such as the production management team, which would be given the most accurate data for forecasting the next production batch, eliminating any unnecessary cost and waste.
Based on our estimations, implementing the new IT system would be able to reduce overproduction by as much as 20 million units in the first year reducing cost by over $11 million a year, far
exceeding the $6.8 million to implement the program.
In addition to the enhanced communication between company departments, switching over to a standardized IT system would allow a more efficient method of tracking inventory. The system
as a whole would become more lean and create less waste. We would be able to more accurately match our inventory levels to predicted sales which in turn will generate a higher bottom line
than if we did not implement a new IT system. With greater control over the inventory, management will be in a better position to make business decisions that can help the company. Overall
implementation of Microsoft Access will yield positive gains prove to be a major asset for Green Mountain Coffee Roasters in the long run.
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