Question

How to make Ajax Profitable with numeric solutions and charts

Ajax Manufacturing Company Case 1. Ajax manufacturers police uniforms- 3 products in 2.com 2. Sells through 400 distributors to several thousan products in 2 colors with many sizes (4,500 SKUS). 3. Mature, price-oriented business with 4 companies. to several thousand local police-supply retailers (no internet) Company Comments mpany Ajax Beta Gamma This year - $16 $14 hasta $29 $20 S13 Prior year $30 $20 $11 Full line Smaller full line Sells to local uniform service companies leasing clean uniform "Narrow product line Shark SI2 Overall $70 S3 S1 565 $65 $62 sales-millions) 4. Ajax' profits turned to losses these 3 years. Losses Millions This year $ 3 Prior year Last year 52 $3 5. Benchmark data suggests Shark is "Cherry-picking." Company Ajax Beta Gamma Shark Salesmen Distributors SKUS 400 4,500 17150 12,000 NA 450 1350 72 Shark $0.60 Comments Ajax "Family on payroll costs $500K; airplane costs $500k annually "Far more salesmen & distributors 4,500 vs. 72 $1.01 50.31 Current Cost Structure Ajax G&A $1.70 Cet weer Selling $1.40 Warehousing & $1.30 Shipping Manufacturing $3.90 Material $5.70 Overall cost $14.00 Price to distributors $12.50 W hy same labor rates & more scale Higher purchase volume $2. 40 $5.99 $10.31 S11.50 6. Shark has already achieved efficient scale; both have efficient capacity utilization MEO Cost 2 MEG Cost Shark 100% . Plant Scale r • Capacity Utilization .

Answer 1

Answer: If we are in place of Ajax, we should be aiming to reduce G&A costs as a priority as it is significantly high due to family on payroll and airplane costs. Secondly, the number of sales representatives should be reduced as it's increasing the cost and in fact has resulted in the reduction of sales and should offer them incentives(rewards) based on performance, to motivate them to achieve higher sales.

The inventory spread uniformly should be targeted according to the observation in demands and supplies of the respective areas(especially where the shark's is being resold). The manufacturing runs for smaller batches are higher, which is further increasing production cost, the focus should be to make manufacturing runs with a higher number of goods produced.

The number of SKU's can further be reduced since 90% of sales are being achieved from the top 2000 SKU's maintaining 4500 would obviously be an extra cost and effort. Instead, those stocks can be utilized for the online supply of goods which would surely be an advantage to help reduce the losses and maximizing the profits.