Western States Stationary Essay

687 WordsJan 19, 20143 Pages
1. Total Forms Control (TFC) fit well into Western’s strategy when it was initially implemented. It allowed Western to offer these “value-added” services to their customers that most of their competitors did not. Total Forms Control should have increased Western’s margins and helped them to increase the loyalty and number of customers. TFC was not performing up to expectations. It had become an increasingly time consuming process and profits from TFC had been consistently declining over the past several years, projected to drop a total of 14% in only two years. 2. The current accounting system charged all customers participating in the TFC program the same standard rates regardless of the level or frequency of services provided. There…show more content…
4. Distributing services using activity based costing reveals that Customer A is a highly more profitable consumer to Western than Customer B, despite identical net sales (see attached). Customer A uses less storage, delivery services, has fewer requisitions and a smaller inventory balance, making them a more inexpensive customer to service, in comparison to Customer B. 5. An analysis of the individual customer accounts suggest that TFC’s current pricing model is ineffective. They are undercharging an alarming number of their customers thereby reducing their overall profitability. Based on this information, managers will hopefully elect to implement the services based pricing model so that customers are charged based on the services they are actually consuming. Ideally, changing the current pricing model will resolve the issue of customers reducing profit by 140% and 60% (Exhibit 8, numbers 3 and 4). If there are still profit draining customers, management should revisit and assess accordingly, either further increasing fees to those customers so their contribution is positive, or perhaps dropping these customers to increase overall profitability. 6. I think the largest issues in adopting Service Based Pricing would be the opposition from the salespeople and the customers. In most cases, fees will increase and it’s unlikely that this change will be welcomed by either party. Western may lose customers if
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