PARTS WAREHOUSE

- An COMPANY
Automotive parts Distribu
Group 7
UM14313
UM14318
UM14319
UM14320
UM14321
UM14322

Ashutosh Patnaik
Dhruv Satija
Divya Jena
Isha Upadhyaya
Kanakesh Gupta
Kanumury Akshita Taruni

Parts Warehouse Company Company History

Parts warehouse company is an
automotive parts distributor
Founded by Roger Corn in 1955
Operating out of a medium-sized
Midwestern city
Dominant auto-parts wholesaler
by 1970 Focus on customer
service and building inventories

Problem Statement
Companys growing cash flow problems even though sales revenue was
increasing year-on-year
Problems arising out of certain sales and marketing policies that had been
instituted with the hope that PWC could provide faster and complete service to
its customers
Changing the system of compensation and incentives to keep the sales-force
motivated

Industry Structure & Trends

National automotive parts
manufacturers
Wholesalers like Parts Warehouse
Company
Retail auto parts Outlets and repair
shops

Stage
1
Stage
2
Stage
3

Warehouse

Market
for
demonstrated
recent years

auto
parts
had
impressive growth in

Inflation and recession prompted

customers to delay the purchase of
new vehicles in favour of fixing their
old vehicles
Inflation was expected to continue or
worsen, promising continued growth of
the auto parts market
Operation

PWC employed 28 people - 4 salesmen with designated territories & others

worked in the warehouse in fields like order packing, delivery, management,
etc.
Inventory turnover ratio went down from 6.1 on net sales of $2.1 million to 4.3
on net sales of $2.4 million in 3 years. Little effort was made to keep track of
requests
Liberal returns policy - average of 15 % returns of sales: Free return policy with
no penalties imposed
Increased collection period Could not avail the 2% discounts offered by
manufacturers for early payments
Front counter system To handle emergency orders: Differentiated PWC from its
competitors
Buyers preferring to frequently telephone for smaller quantities throughout the

Sales Organisation

4 sales
personnel
3 sales persons
covered
immediate
metropolitan
area 80%
revenue

1 sales person
covered
outlying regions

Sales Personnel Responsibilities

Call each
account

Maintain
inventor
y
Responsibili
ties

Establish
new
accounts

Problems
Cash Flow and Profits declining
Average collection period increased resulting in cash flow problems,
not able to take advantage of manufacturers discount for early
payment.
Decline in inventory turnover rate
Stocking items that had been purchased in the past year, not keeping
updated on new requests/demands in market and liberal returns
policy.
Inability to predict forecast
Large number of small orders required more personnel to fill them
than when fewer numbers of large orders which was making forecast
prediction even complex
Management of sales force and compensation plan
Sales personnel were under forced and not motivated, not promoting
products to current and potential customers.
Inability to expand market
Priced strictly according to manufacturers price sheet, two other
discount auto parts wholesalers in the market, widely dispersed
outlying region accounts.

Solutions

1. Why was cash flow and profitability declining?

Credit Payment
There was a shift in the payment mode
from cash to credit . As the average
payment period increased, PWC could not
avail the benefit of 2% discount on early
payment from its manufacturers.
Return Policy
PWC maintained a liberal returns policy.
There was no penalty levied for returns.
There would be cases where customers
purchase parts on credit and return back
before the credit period which was also a
major problem for insufficient cash flow

Solutions

2. Why was inventory turnover continuing to fall?

Solutions
3. How could the company forecast future demand for PWC
products?
The forecast can be carried out at both macro and micro levels

Macro-Level:
First, we make an estimated growth of the spare parts industry
w.r.t inflation and recession
Next, we predict PWCs market share in the scenario by
extrapolating its growth over the years

Micro-Level:
This is to forecast the quantity and variety of parts to be
stocked. Since the earlier practice of using historic data is
obsolete as the customer needs are changing, we propose
market research for understanding new trends.
In market research, we float questionnaire about the customers
buying preferences and collect the data from the entire customer
base served.
Once the data is obtained, it is analysed using an appropriate

Solutions
4. Why were PWC sales man no longer motivated to push their
products in an effective, professional manner as they once had?

Compensation
Sales personnel were paid for any sales coming
from accounts in their area
As a result, they were simply taking orders rather
than aggressively promoting sales

Grievance Handling
The company should have handled Richard
Zeiglers issue in a more innovative manner
without affecting the sales income of the best
salesperson

Solutions
5. How should the company approach its growing market? Should
the company aim to increase market share in its present market
or work at penetrating markets in other areas?
The company should focus on increasing its present market. This
is because it is stated that there are few key account customers in
other regions and are very dispersed.
Strategies for approaching growing market:
Increasing man power:
The overall man-power handling front end and back end should be increased to
increase the efficiency of delivery

Increasing frequency of delivery:

It has been noticed that customers come to the front counter as the delivery
frequency does not match their demand.

Incentivising customers who pay in cash:

Since we can avail 2% discount from manufacturers for on-time payment, we can
offer customers a 1% discount for paying in cash.

These steps will help in improving the current standing in terms of

location, service and price

Solutions
6. How about the compensation plan?

Minimum pay
There should a minimum base salary for all
employees

Incentives
The compensation plan should incentivize
orders above a set sales target

Rewards & Recognition

It should also reward the sales people for
adding new accounts

THANK YOU