Mini-Case 5: Information Flow, Decision Making and Incentive

1012 Words Apr 4th, 2012 5 Pages
Background

Longs Drugs is an American chain with over 436 drug stores located in six western states (California, Colorado, Hawaii, Nevada, Oregon, and Washington. The first drug store was opened in 1938 in Oakland, California, by the brothers Thomas and Joseph. The company generated revenue of US$4.3billion in year 2002, while for the coming year they were planning on opening up 30 new stores in different geographical areas within the states. Further, the company closed down 19 stores in 2002 for unsatisfactory long-term profit. Additionally, it is evident that Long Drugs focuses on market preferences and serves customers with diverse income levels, education, and ethnic and cultural backgrounds.
Improving Information Flows

Good
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This also allows the users to gather real-time data, without any communication lags, with faster communication facilities.
Product Purchasing

In order to consolidate purchasing of products managers can use tools such as integrated ERP systems, inventory control systems and other internal tools to find out what products are currently on demand and products that are highest selling. When these information are gathered, they can divide the gathered information into different regions. Within the regions the Longs Drugs can offer a standard mix of products, in order to achieve large volumes. Further, standard mix of products that would be most desirable for a chain to offer nationally is usually determined by a central marketing and purchasing office that also negotiates the lowest purchase prices with suppliers.
This method would eliminate store managers from using direct ordering and shipping to individual Longs Drugs stores, for it results in higher costs of goods purchased and higher shipping cost, in contrast to standard mix method.
Thus, using standard mix rather than using direct ordering, will result in buying large volumes of each product that they offer in order to get the lowest possible prices and freight cost from the suppliers will actually be beneficial for Longs Drugs.
Incentives

In my point of view, using net profit-based

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