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Chard Appliances. Becca Carlson Bethany Haefner Jack Lim Liang Wen. Opportunity to increase annual revenue by 20% to $137M. Chard’s Annual Revenue. $137M. Opportunity +$23M. $114M. Agenda. The Problem The Root Cause The Solution Conclusion. Problem: Underselling Market Potential.

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slide1

Chard Appliances

Becca Carlson

Bethany Haefner

Jack Lim

Liang Wen

opportunity to increase annual revenue by 20 to 137m
Opportunity to increase annual revenue by 20% to $137M

Chard’s Annual Revenue

$137M

Opportunity

+$23M

$114M

agenda
Agenda
  • The Problem
  • The Root Cause
  • The Solution
  • Conclusion
problem underselling market potential
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

47 7m sales opportunity was lost
$47.7M sales opportunity was lost

Appliance Units Demanded vs. Sold

Units

Demanded

256,821

181,173

Sold

$47.7M

Missed sales

Week

what affects how much we sell
What affects how much we sell?

Dependent Variable

Independent Variables

ideally eliminating variability would increase revenue 37
Ideally, eliminating variability would increase revenue 37%...

“Perfect World” Solution

  • Decreased OCV by 100%,
  • Unit Sold: +37%; +67,173 units
  • Fill Rate: +26%
  • Revenue : +37%; +$42,298,829
realistically optimizing variability increases revenue 20
…Realistically, optimizing variability increases revenue 20%

Optimized Solution

  • Minimum OCV – 2.82 (25%) and $560 (-11%)
  • Unit Sold - +35% (63,015 units)
  • Fill Rate - +25%
  • Revenue - +20% ($22,585,604)
recommendation invest money in increasing customer service levels
Recommendation: Invest money in increasing customer service levels

$400,000 per week can be spent to improve customer service levels in order to maintain a 33% return on investment

25%

Improve Forecasting Methods

75%

Increase Safety Stock Levels

conclusion
CONCLUSION
  • Missed Sales - $47.7 Million
  • Problems - Price & Order Cycle Variability
  • Optimized Solution: 20% (+$23M)
appendix add l costs for new safety stock levels
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 (http://bstocksolutions.com/blog/carrying-cost-of-excess-inventory/)