Case Study 1
An Australian based fabric manufacturer realized that whilst his local market had little room for growth, the New Zealand market represented an opportunity to increase total sales by about 20%.
They duly set up an operation in New Zealand, employing staff and signing a 6 year lease on a building. Other set up costs involved phone systems, office equipment, pallet racking, handling equipment, company cars and so on.
Sales were higher than anticipated but the set up and operating costs were considerably greater than expected.
Because there was greater distance between the point of supply and point of sale the stock requirement was higher than planned, further increasing capital outlay.
To cover peak periods and holidays staff numbers were increased.
The end result was a branch that was highly successful when measured by product sold and gross profit as a result of sales, but one that suffered heavy losses because overheads were greater than anticipated.
As sales increased it became apparent that bigger facilities and more staff would be required to cope with additional stock requirements.
Then the accountants worked out that the more successful they were, the more money they were losing and the end result was to bail out, suffering considerable losses on leases, cars, redundancies, etc.
After a breathing space, we approached the supplier with an alternative. We knew that they wanted the additional sales that the New Zealand market could bring but obviously they were wary of their recent losses.
We showed that the manufacturer could return to the New Zealand market for very limited risk. In return for a percentage of gross sales we would provide the infrastructure required for them to get back into the game.
After some negotiation it was agreed that the manufacturer would:
Malcolm Total Logistics would:
The worst case scenario for the manufacturer is that if things do not work out, all the need to do is to get their stock returned to Australia and no leases, staff, company cars etc to worry about.
We are motivated by the prospect of a percentage of gross sales and the more product sold, the greater our income.
The net result for the client is a reduction in overheads from 30% of sales to less than 10%.
Case Study 2
A New Zealand teacher based in China found a manufacturer of quality pens and office supplies that he knew he could sell here. The product range covered ball points, roller ball, markers, highlighters, and also included paper clips and other bits and pieces.
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