Crafton Industries Case
How might one characterize the carpet and rug industry and Crafton’s position in the industry?
• Industry Sales Trends
• Industry Competitors
• Carpet and Rug
• Distribution
• Crafton Industries’ Competitive Position
2. What are the pros and cons of a wholesaler vs. a company distribution system?
• Advantages of Direct Distribution and Sales Efforts:
• Disadvantage of Direct Distribution and Sales Effort
3. What are the economics (e.g., revenue, cost, and profit margin) of the wholesale vs. company distribution system?
Costs of Wholesale Distribution
wholesalers mark-up on cost to retailers
costs of servicing wholesalers
cost of financing wholesalers’ coconut receivable
total estimate cost
Costs of Direct Distribution
Warehouse …show more content…
Can Crafton “afford” the conversion? (in terms of current asset, current liabilities, and working capital)?
5. Summarize your analysis and conclusion/recommendation (this will be reflected in your case writing).
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Case 5 Hints:
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Q3. What are the economics (e.g., revenue, cost, and profit margin) of the wholesale vs. company distribution system?
1) Costs of Wholesale Distribution
-- wholesalers mark-up on cost to retailers (margin provided) –- 20% of sales billed at the price to retailers or .20/.80 =.25 x $54 million = ?
-- costs of servicing wholesalers – 6% of sales ($54 million)
-- cost of financing wholesalers’ account receivable = average account receivable X account receivable carrying costs
54 million (sales)
= ------------------------------------------------------ X 10% (account receivable carrying costs) 365/90day (collectable period)
-- total estimate cost
2) Costs of Direct Distribution
– Warehouse expense – Annual fixed warehouse cost x 7
– Sales representatives – assuming 4,000 accounts, salesperson make one call per month of 1 hour each and 25% sales time is non-sales (50 weeks X40 hours/wk x .75 = 1500 hours of selling time)
–
• Industry Sales Trends
• Industry Competitors
• Carpet and Rug
• Distribution
• Crafton Industries’ Competitive Position
2. What are the pros and cons of a wholesaler vs. a company distribution system?
• Advantages of Direct Distribution and Sales Efforts:
• Disadvantage of Direct Distribution and Sales Effort
3. What are the economics (e.g., revenue, cost, and profit margin) of the wholesale vs. company distribution system?
Costs of Wholesale Distribution
wholesalers mark-up on cost to retailers
costs of servicing wholesalers
cost of financing wholesalers’ coconut receivable
total estimate cost
Costs of Direct Distribution
Warehouse …show more content…
Can Crafton “afford” the conversion? (in terms of current asset, current liabilities, and working capital)?
5. Summarize your analysis and conclusion/recommendation (this will be reflected in your case writing).
-------------------
Case 5 Hints:
-------------------
Q3. What are the economics (e.g., revenue, cost, and profit margin) of the wholesale vs. company distribution system?
1) Costs of Wholesale Distribution
-- wholesalers mark-up on cost to retailers (margin provided) –- 20% of sales billed at the price to retailers or .20/.80 =.25 x $54 million = ?
-- costs of servicing wholesalers – 6% of sales ($54 million)
-- cost of financing wholesalers’ account receivable = average account receivable X account receivable carrying costs
54 million (sales)
= ------------------------------------------------------ X 10% (account receivable carrying costs) 365/90day (collectable period)
-- total estimate cost
2) Costs of Direct Distribution
– Warehouse expense – Annual fixed warehouse cost x 7
– Sales representatives – assuming 4,000 accounts, salesperson make one call per month of 1 hour each and 25% sales time is non-sales (50 weeks X40 hours/wk x .75 = 1500 hours of selling time)
–