ROAD MACHINERY MANUFACTURING COMPANY(RMM)
Case study. 1
Submitted to -: Submitted by-: Prof Scott Hadley Gurpinder singh 21/01/2015 991342430
BUSM50261 INTRODUCTION-:
RMM is a privately held company established in 1906 and being run by three partners. The company is well known for manufacturing construction equipment and the companies differentiated product line has enabled it to expand its market share in North American as well as markets in South America and Mexico. QPS was the main player in providing courier services to RMM but Due to economic downturns and fluctuations in the delivery period or late delivery service of the vital machine component there was a negative impact on the company’s production due to which there have been issues to change the courier services from QPS to Roomies. In this report we will analyse the issues as well as key impacts of transferring the courier services from QPS to Roomis as well as finding the best alternative for the company and further recommendations in order to tackle the situation. My role as an advisor would be to advice the company on how to further process its courier operations so that RMM can further excel in their operations.
ISSUES-:
In the case it is written that QPS is a financial driven company and it always needs their client to provide some additional deposits as security in order to maintain minimum deposit balance but RMM was not in the condition to provide 10000 dollars deposits due to economic downturns as well as fluctuations
RMM has to coordinate its cross border transactions through its own brokers because of the fact that Roomies does not provide ant cross border agents which are necessary for RMM for cross border transactions moreover there are delays in the delivery process were usual even though the rate is cheaper and there is flexibility in the payment process but according to me RMM should not compromise in losing its share due to delays in delivery of machine components.
It is seen in the case that suppliers were reluctant/not willing to shift the operations from QPS to Roomis and they already have made further investments and prepaid the freight and started billing RMM, so in this the decision was made by Wilkins without enquiring the internal status and working process of Roomis which deliberately threatens the profitability of the company
Welkin was confused that weather he should discuss the topic of shifting back to QPS or not, despite of the fact that the company is incurring loses working with Roomis and moreover there has been significant layoffs as well as substantial pay cuts have been incurred making it harder to stay as a courier service provider with RMM
Analysis of the situation-:
Shipping charges charged by QPS= $150000(increase in $400000 in next five years)
Maintenance of minimum deposits with QPS= $10000, provided (QPS received 80% of RMM business in the past)
QPS demanded cash upfront for courier service and RMM was not able to pay $10000 due to economic downturn in the market and it is seen in the case that it took 30 to 60 days to receive the payment for the products manufactured due to which they were not able to pay QPS within the time required. In this case there are loses shows in the income statement as well as the company is incurring debts i.e. loss of assets because the company is getting its product manufactured in 30 to 60 days so there is inefficiency of income as well as assets. Current assets of the company will be effected ie cash because company will not have enough money to pay of its entire debts
Roomis was ailed with Natex, secondary player in the United States and Natex failed to pick up the order in
