Chard Appliances Becca Carlson Bethany Haefner Jack Lim Liang Wen

Opportunity to increase annual revenue by 20% to $137M Chard’s Annual Revenue $114M $137M Opportunity +$23M

Agenda The Problem The Root Cause The Solution Conclusion

Problem: Underselling Market Potential  If Chard Appliance would have retained market share it had in 1981, sales would have grown to over $250 million in 1993 Expected Actual

Chard’s identified potential reasons why have sales not increased Should more salespeople be hired? More communication between sales and distribution? Are the prices not representative of the market price? Are lead times too long? Are the lead times too variable? Is the company adequately advertised?

Why does it matter? Internal: ProfitabilityExternal: Supplier Relationships Cost increase Advertising Hiring/Firing Pricing Customer Service Cost increase needs to be coupled with an increase in revenue Threats from major manufacturers to stop supplying Small supplier base of 4

$47.7M sales opportunity was lost Sold Demanded 256, ,173 $47.7M Missed sales Units Week Appliance Units Demanded vs. Sold

What affects how much we sell? Units Sold Price # Sales people Adv. Expense Order Cycle Time Order Cycle Variability Credit Adj.Fill Rate Dependent Variable Independent Variables

Price and Order Cycle Variability significantly impact the number of units sold Multiple R-Square AdjustedStErr of SummaryRR-SquareEstimate Degrees ofSum ofMean of F-Ratiop-Value ANOVA TableFreedomSquares Explained Unexplained Coefficient Standard t-Valuep-Value Confidence Interval 95% Regression TableErrorLowerUpper Constant Price Order Cycle Variability Units sold = 12, (Price) (Variability)

SOLUTION: Integrate and strengthen business process management

Ideally, eliminating variability would increase revenue 37%... Decreased OCV by 100%, Unit Sold: +37%; +67,173 units Fill Rate: +26% Revenue : +37%; +$42,298,829 “Perfect World” Solution

…Realistically, optimizing variability increases revenue 20% Minimum OCV – 2.82 (25%) and $560 (-11%) Unit Sold - +35% (63,015 units) Fill Rate - +25% Revenue - +20% ($22,585,604) Optimized Solution

Recommendation: Invest money in increasing customer service levels 75% Increase Safety Stock Levels 25% Improve Forecasting Methods $400,000 per week can be spent to improve customer service levels in order to maintain a 33% return on investment

CONCLUSION Missed Sales - $47.7 Million Problems - Price & Order Cycle Variability Optimized Solution: 20% (+$23M)

Back Slide

Back Slide – OCV -100%

Back Slide –Optimum

Appendix: Add’l costs for new safety stock levels  Assume inventory carrying costs are 10% of price  Found inventory carrying costs are 25% of costs (