The Florida Retail Company (FRC) is a collection of small consumer electronic retail stores. The company is
Question:
The Florida Retail Company (FRC) is a collection of small consumer electronic retail stores. The company is known for its personal and efficient service.Susan Bender, the Vice President of Operations, prides herself on running one of the most efficient operations in the retail electronic industry. One of the main tools for this efficiency is a computer system that allows FRC to closely monitor sales progress and inventory turnover rates.
The computer system now in operation was bought and is currently maintained by Allen Case Machine Electronics (ACME) Retail Computer Services. ACME and FRC have had an excellent and mutually profitable relationship for the past 10 years. FRC maintains a small staff of 3 people to run the ACME retail system.
New Strategy
FRC is planning a bold strategic move into the large consumer electronic retail industry. FRC plans to phase out all of its current small retail stores and mold its business around large super-stores. The first store will be the showcase and model for future stores.Jack Murphy, the owner of FRC, has envisioned a futuristic computer system to support his new store concept.The new computer system will provide all the functionality of the current system (accounts payable, accounts receivable, general ledger, purchasing, inventory control, and sales analysis) and have a fully integrated point-of-sale function. Jack envisions a 'paperless' sales floor where all transactions and merchandise reservations are handles by the computer system. Additionally, the new computer system will have an optical bar code reading capability to facilitate customer transactions.
The first super-store will open at this time next year. FRC plans to open at least two other super-stores in the year following.
Need for New Systems
Susan realized that the current computer system supplied by ACME would not support the larger operations of the future super-store. After some inquiries, Susan believed that ACME was the only supplier capable of offering the software needed. ACME was currently in the process of developing a software package that would provide all the functions of the current systems for larger operations.
Susan contacted David Lansing, the Chief Executive Officer (CEO) of ACME to discuss a possible deal. The two quickly agreed that ACME would supply the needed computer software system for FRC. Susan would be involved initially to help develop the customized point-of-sale system for FRC. Beyond that, ACME agreed to deliver a new software system capable of all functions that the old system provided plus integrating the customized point-of-sale system. FRC was to be the first ACME customer to use the new computer system. It was agreed that the software was to be in place 2 weeks before opening day of the new super-store and that the hardware needed for the software was to be in place 1 month prior to opening day.
A Fixed Price type contract was proposed by ACME for $350,000 for the software based on a $3,000,000 estimate for total development costs. The price of the software was derived by prorating the development costs (including the point-of-sale system) over the expected number of customers and adding 15% profit. ACME required that 50% of the purchase price was to be paid up front and the remainder was to be paid upon delivery of the software system.
Susan thought that the price was fair and the terms and deadlines of the agreement were satisfactory. Close monitoring of ACME's progress would not be necessary since Susan has always relied on ACME to successfully solve FRC's computer system problems; besides, nobody at FRC knew much about developing computer software systems.
Opening Day
Susan was a bit nervous this morning.Everything about the store was ready, but there had been some problems with the computer system during these past 2 weeks. Her system manager, Helen Cooley, as well as 2 ACME representatives has been spending many sleepless nights fixing and tuning the system. Susan hoped all major problems were resolved.
Long lines of people were waiting to get into the store when the doors finally opened. Right away there were problems with the computer software system supplied by ACME. The first customer to be services at the cashier's station took 20 minutes to finally get out of the store due to the slowness of the computer system.Salespeople were complaining about slow computer response time when they tried to reserve merchandise through the system. Soon, there was a long line of people at every cashier station and with every salesperson on the sales floor. Customers were leaving the store due to long lines at the cashier stations and slow salespersons response. The computer system finally 'crashed' in mid-afternoon and became inoperable. The employees of FRC had no idea what to do next.
That evening Jack had a meeting with Susan, Helen and the 2 ACME representatives. Jack told them that the computer system was going to, 'put him out of business and that they had better do something about it'.
- Florida Retail Company Case
- Do you believe that the Fixed Price type contract agreement between FRC and ACME was appropriate way to procure the ACME computer system (state the reasons and what improvements would you recommend for the contract)?
- Where did FRC go wrong (at least 5 ways) in purchasing the software system?
- What were the contents (4 of them) of the Statement of Work (SOW) in this case, and was the SOW sufficient?
- What could or should (at least 8 items) have been included in the SOW?
- What are the generic problems (at least 8) encountered in purchasing a high technology software system (need NOT be specific to the FRC case)?(8 points)
- How would the problems (at least 4 ways) on opening day have been avoided?
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr