How is the industry segmented?
The industry is segmented through large and small …show more content…
What are the economics of the wholesale vs. company distribution systems? a. What is the total cost of wholesale distribution? b. What are the total costs of direct (company) distribution? c. Compare the costs of each alternative approach.
The company distribution benefit economic benefit will flow in shape of increased sales from existing $75 million to a new level, plus margins will also increase by a good proportion. Crafton will avoid being taken over if its distribution network increases
Cost of Wholesale Distribution
Wholesale Margin= 20%
This represents 25% of manufacturer’s price.
Wholesale Margin Dollars=0.25 x $54 M (3M x 7wholesalers = 21M -75 M) = $13,500,000
Costs of Servicing: 6% of present sales - $3,240,000
Total Estimated Cost = $16,740,000
Cost of Direct Distribution Warehouse and Sales Rep Expenses Warehouse Expense 7 warehouses x 700,000 annual cost = $4,900,000. * Sales Rep. Cost Assuming Crafton wants to service its 400 accounts, salespeople make one call per month of one hour each, and 25% of sales reps’