Distribution Challengean exploration of business

This computer simulation gives you and the others:

• an opportunity to manage a “real” business for several simulated quarters

• making decisions as part of a small team covering:

–Marketing–Operations–Finance

• your objective, while competing against the other teams, is to make your business a success

The SimulationThe simulation consists of three stages:

Preparation– Familiarisation– Organisation– Consider objectives– Consider strategies

Decision-making– Submit Decisions– Simulate– Analyse Results– Replan

Review– Discuss & Compare Results

The Situation

• a subsidiary• currently operating• sells three product ranges

– Domestic– Fashion– Contract

• has transportation • prices and costs in a universal currency (the Account

Unit – AU)

You will run this business for several periods, each of which represents one trading quarter

MarketingSales are influenced by

– price (mark-up)

– selling effort

– transportation availability

– inventory availability

– the actions of the other teams

You decide mark-up for each product range separately. Selling Effort and Transportation affect product ranges.

Cost Data

• Transportation – 500 AUs per unit/quarter

• Other Expenses – 7000 AUs per quarter

• Selling Effort – decided by you

Range Discount Level Discount

Staples 40,000 AUs 5%

Fashion 15,000 AUs 20%

Big Ticket 20,000 AUs 10%

Discounts

Other Data

• Prompt Payment Discount - up to 5%

• Interest on Overdrafts – 20%/year

• Interest earned on Cash – 12%/year

• Mandatory Payment to Parent– 75% of Operational Income

– plus 4% of Total Equity

Decisions

For each range separately• Percent Mark-up• Gross PurchasesAnd in general• Selling Effort• Transportation • Creditor DaysUse the decision form supplied and complete it

carefully and legibly and hand to the simulation controller at the specified times.

ResultsResults are returned to you in three stages:Preliminary Results

– demand at cost & ending inventory– Sales, operating profit, cash and overdraft

Full Results– Purchases & sales– Profit & Loss– Balance Sheet– Key Measures

Business Research– Market News (prices & market shares)– Company Reports– Company News

Observations

• it takes time to understand• but the business still has to be run• therefore your decisions will not be perfect• time will be a constraint

• by the end you should (just) be in charge of your business

• your business skills will be challenged

• remember the purpose is to learn! (rather than just to win!)• so, take time to reflect & review• and have fun!