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Homework answers / question archive / Matt Weber and Zach Heuer, CEO and COO respectively of Naperville HardwareDis- tributors, were frustrated with their fourth quarter financial results
Matt Weber and Zach Heuer, CEO and COO respectively of Naperville HardwareDis- tributors, were frustrated with their fourth quarter financial results. At the beginning of the quarter they had been enthusiastic about the profit picture for the company. The economy had been in an economic slump last year, but the first quarter results of this year had shown a positive upturn in shipments. The second and third quarter results were even better. Matt and Zach had been almost exuberant even though profits had not shown much improvement. They both felt the profits in the fourth quarter would improve significantly because they had carryover expenses from the previous year, which they covered with revenue generated during the second and third quarters. While their net profits had again improved in the fourth quarter, the results were not what they expected.
They had their CFO, Carl Weber, do a “deep dive” on their costs for the year. Carl also did some benchmarking for them. Carl came to the conclusion that they were spending too much money on transportation and related distribution service. They were currently utilizing a third party logistics services company, LMZ. In addition to delivering the hardware products to wholesalers and large retailers, LMZ also received, processed, and filled the orders for delivery. Carl recommended that they “in-source” these services, including the transportation.
Matt and Zach were surprised by Carl’s conclusion about the outsourcing of their transportation and related logistics services because they had been dealing with LMZ for about 10 years. But they were even more surprised by the recommendation to in- source. Private transportation service and order fulfillment was not one of their core competencies. They had some reservations.
CASE QUESTION
Matt and Zach had requested you to write a short white paper (2 to 3 pages) presenting the opportunities and challenges in going private.
