SCA $463$ Mid Semester Group Project

Project Do$$s and Don$$ts:

$$ Everyone on the team must participate

$$ Final presentations need to be $10$ minutes $($measurably over or under is not good$)$

$$ Do not spend time retelling the story outlined in the scenario, we all know it

$$ Do not focus on the marketing aspect of this business change, FOCUS on the Warehouse and Distribution implications, think about the warehouse network, # required, associated costs, rational for location choice, available distribution modes, last mile delivery solutions, and other factors as appropriate.

$$ Use the numbers provided in the case so you have some guidelines as to how much you have to spend on this endeavor. I want you to be as financially reasonable with your plan as you can. That said, I am not going to overly scrutinize your numbers, but I need you to understand that you do not have unlimited resources.

$$ You can substitute the $$widget$$ for another tangible product if that makes it easier for you as long as the characteristics outlined in the case accurately apply.

You are the owner of a rather successful widget manufacturer that sells its products through a variety of roughly $1800$ select retail distribution points throughout the US$.$ Your products are well regarded by consumers and to maintain that perception of uniqueness, you have decided to retain some control over those distribution points $($basically$,$ you are saying that you don$$t want your products available in every single retail outlet$).$

You have been in business for over $20$ years and while it has varied over time, you have recorded a net increase in gross sales AND operating profit in each of those $20$ years. The last $5$ years have seen an average growth rate of $7\mathrm{.}5\%$ in both sales and operating profit. Sales for the most recent fiscal year were $$875$ mm$.$ Your net profit after accounting for all operating expenses, taxes, a $3\mathrm{.}5\%$ dividend payable to both you and your partner, etc. is roughly $4\%$ which you can use to reinvest in the company or take as additional profit. You recognize the importance of maintaining the core competencies which have made your company so successful so you regularly reinvest that profit back into your company.

When you first started your business $20$ years ago, you were relatively conservative with growth and expansion plans. Due to some creative discoveries from within your R&D department you were able to develop and introduce some unique options to your widget, all of which are patent protected. You saw the opportunity to leverage that discovery and greatly expand both your manufacturing, distribution and retail foot print.

That expansion plan however required a great deal of cash $($well north of $$50$ mm$)......$ cash you didn$$t have at the time. This was in $2008$ and due to the financial crisis, banks were hesitant to loan you money and while taking your company public was an option, the equity market wasn$$t that attractive and you were very hesitant to give up control of your company.

You opted to sell a $35\%$ stake in your company to a private equity firm in order to raise the needed capital. While you had some initial apprehension, the partnership with this firm has worked out quite well and you are pleased with the relationship. You meet with them face to face semi$-$annually and your CFO sends them financial updates quarterly.

The relationship as stated has been solid, they pretty much leave you alone, then again, you have consistently delivered against all of your sales and profit objectives $($trust me$,$ when sales are good, life is good$).$ Over the course of this relationship, you have selectively approached your partner when you felt there was a necessary business case that required a cash investment that was above and beyond what was available from the annual $4\%.$ You and your team were always able to present a sound business plan and financial justification for the added investment. The one thing you and your partner did insist on was that any incremental cash investment in the business $($meaning pulling forward the anticipated $4\%$ from future years$)$ must return a positive ROI within $3\mathrm{.}5$ years.

Annually, the senior leaders within your organization spend one weekend per year on an executive retreat where you review and update your strategic business plan. Here you chart the course for the next $5$ to $10$ year period and discuss potential threats and opportunities that you may face and alternative responses. The last few years, one topic of discussion has been the changing retail landscape and the impact that E commerce is having on consumers purchasing habits. The recent Covid pandemic has only heightened that situation with many of your $$select$$ retail establishments being forced to close, as a result, your $2$nd quarter sales slumped $22\%$ over the same quarter LY$.$ You are confident in the long term viability of your product but you are concerned that several of your retail partners do not have the financial strength t