Senco Electroniccs Case Study

Topics: Costs, Variable cost, Total cost Pages: 4 (1121 words) Published: October 12, 2010
Senco Electronics Case Study

1. If I were Skip Grenoble, which alternative would you advise Ms. Shannon to implement? What criteria would you use to arrive at your decision?

If I were Skip Grenoble, I would advise Ms. Shannon to utilize air transportation as this would afford Senco greater flexibility and responsiveness in reacting to fluctuations in demand in a high tech industry that is characterized by short product life cycle. As a U.S based contract manufacturer of laptop and personal computers, in my opinion, Senco is providing a fairly high substitutable service. It this case, it then follows that Senco needs to provide higher customer service levels in order to gain repeat customers. Air will provide higher customer service levels since it provides faster transit times at the supply side, which when utilized properly translates to shorter order cycles. For example, if Senco can reliably provide customers with its products in a relatively short time period, then its customers can often minimize inventory costs. It follows, then, that such a cost reduction could be as important as a price reduction. Hence, minimizing customer’s inventory costs is just as important as keeping products low as it will contribute to more profit or in turn enable the seller to become more competitive. Last but not least, faster transit times can also translate to shorter and more reliable forecasting, as Senco would be able to rely more on smaller and more frequent shipment of goods to their warehouse. Nevertheless, this decision was also made with the consideration that Senco aspires to become more lean and efficient by adopting operational models such as Just in Time in order to be able to operate with a minimal amount of inventory at any given moment as variable cost for air transport is fairly high. It is only with this consideration in place that Senco should stick with air transportation in the case that their forecasted 10% annual increase in demand for the...
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