The thompson refrigerator company

Assignment Help Management Theories

Reference no: EM13832948

Case number 1

In order to help draw reasonable borders on the case, please prepare your answers primarily on the case contents and the text and other materials. That is not to say that you are limited to only the case and course materials (we are always looking for extra work or slightly different "twists" on the subject matter).

Complete your answers to the questions at the end of the case. For essay- or narrative-type questions MS Word is preferred. If you use a spreadsheet (e.g., Excel) then of course that will be a separate file. The file extension (e.g., doc/docx versus xls/xlsx) should make the difference obvious.

The Thompson Refrigerator Company, Inc.

Thompson is a niche manufacturer of a refrigeration product (currently the Model 786-R4 refrigerator). Thompson is headquartered in Melbourne, Florida collocated with the manufacturing plant.

Thompson distributes the refrigerators using a network of seven contractor operated warehouses; and one smaller company owned warehouse operation collocated with the Melbourne location.

During the last quarterly review the CEO expressed concern that the warehousing operations seem to be expensive and "the cost for each warehouse is sort of all over the place." The CEO asked if it would be possible to do a quick analysis of the warehousing function. [Of course that was a rhetorical question. As you might expect, the answer was "sure we can do an analysis for you".] The CEO said that she would send over some more specific questions after the meeting.

As a logistician for the company you are to play a key role in doing the analysis and reporting the results to the CEO.

In preparation for the analysis you asked the Comptroller for some financial information. The Comptroller provided the financial statements for 2014, the most recent complete year. These are attached.

You also asked the VP who oversees warehousing operations for some data. The manager of warehouse operations sent over the most recent warehouse performance data. This is also attached.

When you get back to your desk you find the list of questions that the CEO had promised to send over. Here are the CEO's questions. (10 points for each question/answer)

1. Comparing performance during the first five months of 2015 with 2014, which warehouse shows the greatest improvement in performance? Briefly explain.

2. Comparing performance during the first five months of 2015 with 2014, which warehouse shows the poorest change in performance? Briefly explain

3. Comparing all eight warehouses, which warehouse does the "best job"? What criteria did you use? Briefly explain why you used those criteria.

4. One possibility is to terminate one of the current contracts and to engage a new contractor. This might offer the possibility for better performance/reduced cost at that site. Also, there may be a "spillover effect" to help "motivate" the other contractors to reduce costs.

If one contractor is to be changed, which one do you recommend? Briefly explain why.

5. The year 2015 is almost half over. How much is the firm likely to spend for warehousing at each of the eight warehouses for the last six months of the year? How much in total for the year? Is this better or worse than budgeted? Briefly explain your work and answers.

6. Using the 2014 financial statement, complete a Strategic Profit Model. Briefly interpret some of the key items that most relate to logistics.

7. Holding all other information constant, what would be the effect on ROA if warehousing costs declined 10 percent? Explain.

8. What is your overall analysis and recommendation (or recommendations) to the CEO? Briefly explain.

9. I have heard a bit about logistics. How can warehouse operations be an activity in the logistics channel? Briefly explain.

10. We have put a bit of money into our information systems. How can IS be applied in warehousing operations at the Thompson Refrigerator Company? Hint: recall that we looked at 3 types of IS. Include whether each type has the potential to help meet the CEO's goal to reduce warehousing expenses.

Prepare a memo to the CEO with the answers to her questions. You also need to send your supporting analysis. After all, the reason that we do this type of analysis is to help manage better, solve problems, and the like. So interpreting the information in relation to the business situation is pretty important.

There is no designated format. You can use a format that you might use at work or you might have learned (e.g., a "staff paper").

BUT regardless of the format

1. The answer to each question needs to be easily identifiable. The CEO is probably not going to remember the details of each and every question and go "looking" for the answer somewhere in a document. And

2. The CEO has asked you to explain your answers. So each answer needs to have the answer plus a bit of supporting rational. That does not mean that each answer needs to be pages long! The backup work might be a bit lengthy, but the answer itself and the rational will usually only be a couple of sentences.

The Thompson Refrigerator Company, Inc. Income Statement 2014
Sales			$4,003,450
	Cost of goods sold		$937,000
Gross margin			#3,066,450

	Transportation cost	$657,322
	Warehousing cost	$735,982
	Inventory carrying cost	$567,987
	Other operating cost	$345,876
	Total operating costs		$2,307,167

Earnings before interest and taxes			$759,283

	Interest		$110,000
	Taxes		$69,000
	Net income		$580,283

The Thompson Refrigerator Company, Inc. Balance Sheet 2014
Assets
	Cash	$706,034
	Accounts receivable	355,450
	Inventory	1,590,435
	Total current assets		2,651,919

	Net fixed assets	803,056
	Total assets		$3,454,975

Liabilities
	Current liabilities	$1,678,589
	Long term debt	398,060
	Total liabilities		$2,076,649

Shareholders' equity		1,378,326
Total liabilities and equity			$3,454,975

The Thompson Refrigerator Company, Inc. Warehouse operations performance data
	2014				2015
	Units shipped		Warehouse expense		Units shipped		Warehouse expense
Location	Jan-Dec	Jan-May	Jan-Dec	Jan-May	Projected Jan-Dec	Actual Jan-May	Budgeted Jan-Dec	Actual Jan-May
Albany	17,437	4,080	$156,803	$35,890	18,000	4,035	$178,000	$40,228
Buffalo	6,920	3,061	$63,417	$27,915	7.200	3,119	$73,000	$29,416
Cleveland	28,104	14,621	$246,315	$131,618	30,000	15,230	$285,000	$141,222
Detroit ^z	3,021	1,005^z	$28,019	$8,600^z	3,100	1,421	$31,000	$14,900
Melbourne	2,016	980	$16,411	$8,883	2,000	804	$17,000	$9,605
Los Anna	16,491	11,431	$151,975	$109,690	17,000	9,444	$176,000	$93,280
Portland	8,333	4,028	$73,015	$36,021	9,000	4,600	$85,000	$42,616
St. Louis	5,921	2,331	$51,819	$23,232	8,000	2,116	$56,000	$19,191

Reference no: EM13832948

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