May 9, 2012
Cardon Carpet Mills, Inc. Case Study
The Cardon Carpet Mills Company is a carpet company that distributes its line through seven different floorcovering wholesalers around the United States. This company focuses on manufacturing a full line of medium to high priced carpet primarily used residentially. The senior executives, looking to integrate direct distribution and bypassing wholesalers, are seeking the best outlet for increasing profit. With increased pressure from retailers to shave their profit margins to accommodate pricing demands the wholesalers wanted Cardon Carpet Mills to consider a reduction in its prices. This will play a large part in how the company will decide if direct distribution is a valid option within this case study (Kerin and Peterson).
In the case study by Kerin and Peterson, strengths within the Cardon Carpet Mills Company support and add validity to its mission. Quality carpet and great wholesaler relationships describe the foundations of the company. There is emphasis in their advertisement on fiber type, colors, durability, and soil resistance, not price. Cardon Carpet Mills currently have long-term relationships with wholesalers that supply 4000 retail accounts. “Inspection of distribution records revealed that 80 percent of residential segment sales were made through 50 percent of its retail accounts…Percentage indicated that at the retail level the company was gaining adequate coverage” (Kerin and Peterson). There are several weaknesses for Cardon Carpet Mills, Inc. It is a very small company, not in top 20 manufacturers. Cardon Carpet Mills, Inc. has no export sales. It costs Cardon 6% of residential sales to service 7 wholesalers. 25% of salespersons time is spent on non-selling activities. Only 40% of one-hour sales call was devoted to selling carpet, 60% was selling non-competing products. 1/3 of Cardon's current retailers had joined buying groups. The current inventory turnover is at five...