Allied Office Products Case Write-up
Allied office products have two different divisions, each of these were treated as profit centers. One of them is the Form Manufacturing division, which basically involved with producing business forms and specialty paper products. The other one is Total Forms Control activity division, which is a program of business forms inventory management services.
The industry value chain is:
TreesPulpPaperForms manufacturing Forms salesTFC Customer
Purchasing Manager Customer receiving Forms end users
The TCF chain is:
Storage and inventory financing Requisitioning Stock selection and pick-pack Order entry—billing Desk top delivery Freight
As lots of companies are going green and changing everything to paperless, electronic writing forms are becoming more and more popular. The TCF division is relatively unique, but customers may also look for Fedex and UPS for “pick pack” service and delivery. Medium power.
Rivalry: Medium to High. There is lots of competition within the form manufacturing industry since the industry just matured and every single company was seeking ways to generate sales growth. However, the good thing is that TCF division is a relatively new service and the competition is not intense. Therefore, the overall rivalry is medium to high.
Strength | Weakness | Opportunities | Threats |
1. Two profit centers are correlated with each other. Form manufacturing would transfer products and fulfill its demand for TFC division. | 1. Excess inventory. The company usually gets cartons that just sit on the shelf forever. It reduces the inventory turnover ratio and does not help optimize the usage of the warehouse. | 1. The industry is pretty new and therefore there is excess demand over supply. | 1. Inventory Obsolescence. Paper products may be outmoded quickly and the inventory sit on their shelves will lose its value quickly. |
2. It could offer multiple services, including “pick-pack” and “desk top delivery”. | 2. Cost of capital. Customer does not pay for inventory until requisition submission and therefore the company lost investment profits on earning that revenue. | 2. More and more firms are tend to store their inventory in other warehouses in order to reduce their inventory carrying cost, and therefore customers’ preference indicate the industry’s potential growth. | 2. The world environmental “paper less trend” has made paper products less and less attractive and thus decreasing the demand for paper products. |
3. TFC salespeople have the option of outsourcing product if necessary. | 3. Service fees were not charged based on activity, and therefore reducing the profitability. | 3. Technology advancement could help the company to improve its inventory control system more effectively and more efficiently. | |
| 4. Employees in distribution department are not satisfied with the current strategies and data entry is redundant. | | |
Conclusion: It is a relatively attractive industry and Allied is doing good, except that it might achieve even more profits if could adjust its pricing and costing program.
Strategic positioning to achieve this apparent success is based on:
* The cooperation between its two divisions: forms manufacturing division and TFC division.
* Focus on value added service—“pick pack service” and “desk top delivery”.
* Sales force charges average of 20% of product & services and clients were charged service fee based on the cost of sales of the product, regardless of the specific level of...