What would you advise the company to do

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Complexity of Operations and the Effect on Cost In the mid-1990s, a large consumer goods manufacturer moved its customer-based department and specialty stores to mass merchandising in a a variety of retail stores, large and small. The strategic change required it to increase significantly the complexity of its operations-the number of products, prices, discounts, patterns, colors, and sizes. After noticing the firm's expense beginning to rise, the company hired a consultant to study the firm's cost structure. The findings:

  • As many as 10 different vendors provided certain purchased items.
  • Of the firm's customers after the strategic shift, 98% were responsible for only 7% of total sales volume.
  • The wide variety of prices and discounts and promotional programs added complexity to the accounts receivable collection process because of increased disputes over pricing and customer balances.
  • Seventy-five percent of the company sales involved products with five or more color combinations.
  • Customer demands for fast delivery of new orders had caused a shift in manufacturing to smaller batch sizes and more frequent equipment setups. Thus, total setup-related costs increased.

Required: What would you advise the company to do?

Reference no: EM131242842

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