Supply Chain Management

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Performance Control at Happy Chips, Inc. Wendell Worthmann, manager of logistics cost analysis for Happy Chips, Inc., was faced with a difficult task. Harold L. Carter, the new director of logistics had circulated a letter from Happy Chips’ only mass merchandise customer, Buy 4 Less, complaining of poor operating performance. Among the problems cited by Buy 4 Less were: (1) frequent stockouts (2) poor customer service responsiveness and (3) high prices for Happy Chips’ products. The letter suggested that if Happy Chips were to remain a supplier to Buy 4 Less, it would need to eliminate stockouts by: (1) providing direct store delivery four times per week (instead of three) (2) installing an automated order inquiry system to increase customer service responsiveness ($10,000.00) and (3) decreasing product prices by 5 percent. While the previous director of logistics would most certainly have begun implementing the suggested changes, Harold Carter was different. He requested that Wendell prepare a detailed analysis of Happy Chips’ profitability by segment. He also asked that it be prepared on a spreadsheet to permit some basic analysis. This was something that Wendell had never previously attempted, and it was needed first thing in the morning. Company Background Happy Chips, Inc., is the fifth largest potato chip manufacturer in the metropolitan Detroit market. The company was founded in 1922 and following an unsuccessful attempt at national expansion has remained primarily a local operation. The company currently manufactures and distributes one variety of potato chips to three different types of retail accounts: grocery, drug, and mass merchandise. The largest percentage of business is concentrated in the grocery segment, with 36 retail customer locations accounting for 40,000 annual unit sales and more than 50 percent of annual revenue. The drug segment

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