Direct Marketing Inc. (DMI) offers database marketing strategies to help companies increase their sales. DMI’s basic package of services includes the design of a mailing piece (either a Direct Mailer or a Store Mailer), creation and Maintenance or marketing databases containing information about the client’s target group, and a production process that prints a promotional piece and prepares it for mailing. In its marketing strategies, DMI targets working women ages 25 to 54 who are married with children and who have an annual household income in excess of $50,000. DMI has adopted activity-based management, and its controller is in the process of developing an ABC system. The controller has identified the following primary activities of the company:

Use database of customers.....................Accounting

Service sales...............................................Mailer assembly

Deliver mailers to post office...................Process orders

Supplies storage........................................Purchase supplies

Clint follow-up............................................Design mailer

Database research trends........................Building maintenance

Schedule order processing.......................Processing cleanup

Personnel...................................................Mailer rework

Required

1. Identify the activities that do not add value to DMI’s services.

2. Assist the controller’s analysis by grouping the value-adding activities into the activity areas of the value chain shown in Figure.

3. State whether each non-value-adding activity is necessary or unnecessary. Suggest how each unnecessary activity could be reduced or eliminated.