SCM Case Study

KiddieLand & the Super Gym

BY
Manoj 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 4th 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) $715

Home Delivery Charges
(Additional) $40
Total (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

Avoid last day rush.

Order Today!!!