Coldplay is a manufacturer of refrigerators, freezers and dishwashers with a cus
ID: 376881 • Letter: C
Question
Coldplay is a manufacturer of refrigerators, freezers and dishwashers with a customer base primarily in the Midwest. They have one plant in Dayton, Ohio that makes all three models. Coldplay has analyzed their customer demand patterns and noticed that retail buyers typically buy and schedule delivery for one of the three models at a time. Coldplay does not charge an order fee, but customers pay for all inbound transportation, which is expensive per inbound load because the size of the appliances requires using truckload carriers. Inventory carrying costs are relatively high at 20% of cost for each model. A new manufacturer called CutRate has entered the market and is selling for 10% less per unit. CutRate manufactures refrigerators and freezers in one plant on the east coast and dishwashers in a different plant on the west coast. Coldplay wants to preserve as much margin as possible but also help their customers reduce costs. Which is the best solution for the supply chain manager at Coldplay to recommend given the goals of preserving most of the current margin at Coldplay while lowering cost for their customers?
A. Coldplay should price match and cut their prices by 10% B. Coldplay should recommend customers order their products jointly and delivered together C. Coldplay should offer a 15% salvage value on their appliances D. Coldplay should encourage truckload purchases of each modelExplanation / Answer
Ans B
The combining of orders will help in full truck load formation. It will reduce the transportation cost for customers as total cost will get split. Also, the profit margin will be sustained in this case for the company. Asking to purchase each model in truck load is not right as it may lead to excess inventory for customer.