Cheezy Wheezy is a chain of specialty retail shops selling gift packages of cheeses, jams, jellies and other fancy food items. Management is in the midst of issuing its first catalog to be widely distributed and is at the stage of designing their order form for the catalog. The biggest challenge they are faced with is how they will handle the transportation and shipping costs. Based on benchmarking their competition common methods are absorbing the costs into the products price, charging by weight, charging by money value, and some ship by billing charge on delivery (COD). The relative costs per catalog order are greater than the same order being sold in their retail shops without even considering the transportation costs. Transportation costs are causing the whole project to be bogged down due to the tapering costs involved. Tapering costs are the rise of costs due to weight and distance. Also, they cannot use the average transportation costs because of over and under charging and the consequences associated with these. Cheezy Wheezy needs to nail down a policy for shipping costs so they can proceed with their catalog. The policy needs to be simple to understand for the customer so they are not turned away as well as accommodate the catalog so that the policy and rates do not take up valuable advertising space.
1. The first thing I would recommend is having a statement on the catalog/order form that indicates that items may be limited due to availability. Along with this statement I would include on the order form an area for contact information (phone number, email) that the customers can fill out so they can be reached in the event any thing needs to be addressed regarding their order. If a stockout occurs I would have a customer service representative contact the customer and inform them of the stockout and give them suggestions on something they could substitute for the stockout item or see if they would like to put the item on backorder. If no contact information is given I would fill the lines that are in stock and send a letter explaining the stockout and offering a way to reconcile the order or offering to issue credit.
2. Cheezy Wheezy should for the most part take the customers word on weather a delivery arrives or not. I would however adopt a system in which all discrepancies can be researched, evaluated and documented. With the technologies available most carriers will have record and signatures of deliveries. Understanding that some shipments may get lost in transit, I would rely heavily on this and refill only the orders that do not have proof of being delivered. I would not use a carrier that does not have systems in place to track its shipments.
3. I would include pre-paid postage on the envelopes to be used for orders to Cheezy Wheezy. I think the cost is justified making it more convenient on the customers to send their orders. Not including the postage could be a deterrent for some customers and could result in lost or delayed sales. It shows the customers good faith of doing business.
4. I think all of the orders should be received at Cheezy Wheezy’s headquarters in New Glarus and then pushed through to fill and ship the orders. By using the New Glarus location creates a connection for the consumer to the company. Regular customers may not make the association if they are mailing an order for a New Glarus based company to another city. An advantage of mailing to a major city is that there could possibly be a faster mail system.
5. Cheezy Wheezy should incorporate the costs of packaging into their shipping and handling fees. I would not disguise these prices in the price of goods. I would implement a variable rate based on the destination and packaging