case study
Your team will be given two classes to prepare a 10-20 minute presentation for company management (in the format recommended at the bottom of page 3). You will be assigned a date and time to present your recommendations to the class (management). After presenting, the team leader will e-mail (as attachment) their team’s PowerPoint presentation to the instructor. After all presentations have been given, the instructor will forward  them to all students. Each student must  review the presentations and vote for the best presentation from the other groups (not their own). (Best team receives a bonus point). Each team member also evaluates  the  other team member’s on their team. Each  team member  must also work alone to prepare a 1-2 page Word document (2 points) that: 1) discusses their own contributions to their group and those of  the other team members, 2) a self critique of  their own teams performance and conclusions as presented (at least one good and one bad point), and 3) their evaluation of the other team’s conclusions and recommendations (these should be specific comparisons and critiques, not just comments about whether they were good or bad ). Total possible points for this exercise is 5 (6 for the team voted best).

BACKGROUND

Computer Warehouse, Inc. (CWI) has been a successful nationwide computer software, hardware and digital devices retailer for more than fifteen years. Each of its 500 stores is a franchise, which means that it is owned locally by an individual or individuals, not the parent corporation CWI. However, like most franchises, certain functions like bulk purchasing, warehousing, distribution, shipping, quality control, and information systems support are provided by the parent corporation (located in Dallas, Texas). The franchises conduct their own local inventory control, sales promotion, and customer service.

Recently CWI has been experiencing problems with their Mount Laurel, NJ franchise (MLF).  While the inventory replacement orders made to CWI by MLF have been about the same as other franchise orders, MLF has been complaining that a higher than normal amount of software and hardware they are being shipped by CWI is defective. CWI does not accept returned merchandise or responsibility for damaged merchandise unless there is evidence of damage to packaging during shipping. Because of this policy, MLF is refusing to pay for its recent shipments unless CWI takes back the defective merchandise and takes steps to improve their quality control responsibility.

MLF claims that many customers are returning their software and hardware complaining that it is defective. MLF’s sales return policy until recently has been a “30 day money back guarantee” (less a 15% restocking charge if the packaging is damaged or the instructions are missing). This means that MLF Customer Service must deal directly with the manufacturers for replacements of defective items since CWI claims it is a Customer Service problem, not a quality control problem. Most manufacturers send replacements for defective items to MLF promptly but returning all the defective merchandise is creating a major burden for MLF, which they feel is really the responsibility of CWI.

Bill Big, Chief Executive Officer of CWI is quite concerned about the problem, but is puzzled by the fact that none of his other franchisees are reporting as many problems with their merchandise as MLF. He has talked with his head of quality control and been assured that all shipments to MLF are leaving the shipping dock intact. Frank Storage, Inventory Manager at MLF, has confirmed that the shipments “look OK” when they arrive at MLF from Dallas.

Merle Little, owner/general manager of the MLF franchise, bases his belief that the merchandise he is receiving is defective on the large number of returns that he has been experiencing at his customer service desk. Clark Correct, MLF customer service manager, has assured Mr. Little, that “the defective merchandise problem can’t be tracked to any particular manufacturer or batch shipment with the information he has.” Mr. Little understands this to mean that Clark, using information available to him, has determined that no one manufacturer or shipment can be blamed for the defective merchandise. Since it is unlikely that many different vendors are producing defective merchandise, Mr. Little has concluded that CWI must somehow be damaging their shipments on the way to New Jersey.

Bill Big and Merle Little decide to hire a crackerjack team of consultants from BCC to look at the problem. This BCC team specializes in their ability to gather information, analyze it, and make recommendations for obtaining the additional information that will be needed to correct the problems. When they arrive on the scene at the Mount Laurel store, this is what they find.

TEAM FINDINGS

1. When new shipments are received from Dallas, the receiving inventory clerk, Peter Packer who works for Frank Storage, opens the shipping crates, checks for damage, runs a bar code on one package of each identical merchandise type, and enters the number of units received in the container into the MLF inventory database. These bar codes (printed on each item’s packaging) identify the particular item type by a manufacture’s product type ID number that is used as the MLF inventory control number key. This is not a unique serial number for each item. Peter does not enter the shipment number into the database even though there are extra fields on the inventory database that could be used. Peter retains a paper file of shipping documents by date for Frank.

2. When sales clerks at their registers record a sale, they pass each item through a bar code reader. This generates a sales slip and updates the MLF inventory database for that particular item (reducing it by one). Paul Collins, the Sales Manager, has been assured by the head clerk that no items pass through the bar code reader unrecorded and that all packages they sell are shrink-wrapped and bar coded. If the bar code reader doesn’t work on an item, the clerks manually enter the product ID # under the bar code (no code, no sale). Register totals are balanced to cash drawers each day with very few differences reported. Accounting uses the MLF inventory database to reconcile with register receipts daily. Only accounting personnel are permitted to change the sales price of items on the database, but they do this only with the approval the heads of sales and marketing. Only inventory personnel may increase the number of items on the database. Only sales clerks may decrease the number of items on the database.

3. Returns are directed to Clark Correct, MLF Service Manager, at the Customer Service Desk. The customer is asked to fill out a form that asks the reason for the return of the merchandise. Only if the customer checks the merchandise defective box and returns it with all the original packaging, is a 15% restocking charge not deducted from the refund. Clark has a stack of these return forms on his desk that he is more than happy to hand over to the BCC team. They find that almost 75% of the forms have the “merchandise defective” box checked, which is what Clark has reported to Mr. Little. Clark sends the defective merchandise to Mary Query to ship back for a replacement, and the non-defective merchandise to Bill Blank for repackaging and reentry onto the inventory database.

4. The defective merchandise that is sent to Mary Query (who also works for Clark), must be logged, bundled, and sent back to each manufacturer. When replacement items are received back from the manufacturer, they are sent directly to Mary rather than to Peter Packer (Receiving Clerk). Mary logs the replacement items in her log book and gives them to Bill Blank (Inventory Clerk) to reenter on the inventory database. It is not coded as a replacement item. Mary was so swamped with defective items and replacement items in January that she got sick and has been out for a month. Her office is so full of these items that her paper logs can’t be found. Bill is unsure which piles are which.

5. Bill Blank, (works for Frank Storage), shrink wraps the return items in their original packaging, and places them back on the shelf for resale. If the original packaging is missing or damaged, he “borrows” packaging and/or instructions from Mary Query’s stack of defective software and hardware. After repackaging, he adds one unit to the inventory database for that particular product, though he admits he sometimes does this in batches. He does not code them as returned merchandise, though there is a field for this on the inventory database.

6. Inventory Manager, Frank Storage conducts a physical inventory of all merchandise on the last day of the year. At the end of last year (Dec. 31st), he showed 35% less inventory on the database than he had on the shelves. He had Bill adjust the database inventory upward, and new orders downward to achieve target inventory levels. These new orders came in late January.

7.  Susan Bright is in charge of marketing for the MLF store. When she heard that inventory levels were high in late January, Susan decided that a big “February Frolic Sale” was in order.  She recommended to Mr. Little that the store offer a 15% discount on all merchandise in stock, and that the money back guarantee be extended to 90 days to beat the competition in the area. The sale was a big success. Unit sales figures were excellent, inventories went down, and Susan has just now returned from the vacation she took in the Bahamas with her bonus check.

8. From Don Dollar’s (Accounting Manager) perspective the sales figures for February did look pretty good. Unfortunately, returns are even brisker (20% of all purchases in February have already been returned, up from 5% in January and there are still two months to go on the money back guarantee). It’s also disturbing that restocking fee revenue is lower, given the higher number of returns. In the past he estimates that 50% of all returns generated restocking fees. If his recent financial figures are correct, only 5% of returns are generating restocking fee revenue. Thinking that even more merchandise must be defective (though he has no report to prove it), he notified Mr. Little.

ASSIGNMENT FOR THE TEAM

The next thing the team did was to create a matrix of MLF employees to determine what information they had available and what information they need to perform their jobs well.

Name    Responsibility    Information Available    Information Needed
Mr. Big    CEO CWI
Mr. Little    MLF General Manager
Clark Correct    MLF Service Manager
Mary Query    MLF Returns Service Clerk
Frank Storage    MLF Inventory Control Manager
Peter Packer    MLF Receiving Inventory Clerk
Bill Blank    MLF Restocking Inventory Clerk
Paul Collins    MLF Sales Manager
Sales Clerks    MLF Sales Clerks
Susan Bright    MLF Marketing Manger
Don Dollar    MLF Accounting Manager

After a preliminary look at the questions below which Mr. Big had asked them to address, the BCC team realized they needed more information to answer the questions. They prepared a presentation for management that concentrated on what additional sources of information they needed to obtain the answers, where and how to get the information, and how it would be analyzed and used to answer the questions and solve the problems.

1.    What is wrong with the hardware/software? Is there really anything wrong with it?
2.    What are the possible causes of the defective merchandise? Who is verifying that it is defective?
3.    Which shipments contained defective merchandise? How is this tracked?
4.    Which manufacturer’s merchandise is experiencing the highest rates of defect? How is this determined? What percentage of defective merchandise is software? Hardware?
5.    Why aren’t the other franchises experiencing the same rate of defects? Is MLF using their database properly?

They also were asked by Mr. Little to address these questions. He wanted to know what sources of information they would need and who would need it to do their jobs correctly.

6.    What is causing the discrepancy between our database inventory and our physical inventory?
7.    If we find and eliminate the cause of the defective merchandise, will it solve our inventory problem?
8.    Could there be other problems besides the defective merchandise?
9.    Is there a difference in defect rates between merchandise received from CWI, and the replacements received from the manufacturers?
10.    Does our return policy have anything to do with the problem?

After determining the information needed to answer above questions, the team put together a PowerPoint presentation for management: Their presentation had the following format:

I.    Brief summary of fact findings from available sources
II.    What additional information is needed?
III.    How should the information be gathered? (How, where and by whom?)
IV.    What problems can be corrected with this new information?
V.    Conclusion/Next Steps