DAKOTA OFFICE PRODUCTSJohn Ma_Ione, General Manager of Dakota Office Prod’Jots DOP) was concerned about the financial resulis for calendar year 200D, Despite a sales increase from the prior year, the company had just suffered lhe tine ‘loss in its history (see summary income statement in Exhibit 1 i.Dakota Of Products was a regional distributor of (Ace suppiies to instrtutions and common:jai busineSSeS, II offered a comprehensive product line ranging from simple witting implements (such Et5 pari 5, pencils, and markers) and fasteners lo speciaJty pape r for ni.ocl ern high-speed copiers and printers. DOP had an excellent reputation for customer service. and r es.pan &warless.130P riper aged several distribution canters In which personnel unloaded truckload shipments of products from manufacturers, and =wad the cartons into designated storage locations until customers requested the Items_ Each day, alter custorner orders had been received DOP personnel drove forklift trucks around the warehouse Ito accumulate the canons of items a rid prepared them for sill pmerilTypically, DOP shipped products to its customers using commercial truckers_ Recently, DOR had attracted new business by of a “desk top” option by delivering lip e packag es of su ppli ee d i redly to i ndivid u al locations al the customer’s site_ Dakota operated a small fleet of !rucks and assigned iiiirehiatise personnel as drivers to make the desktop deliveries. Dakota, charged a small price premium iup to an add ilion al 2% markup) for the convenience and savings such direct delivery orders providsd 10 customers, The company believed that the added pone for this service could improve margins In liGhlighiyCarripf3titve office supplies distribution business.DOP ordered supplies treat many different manufaclurers. II priced productstoits end-u se customers by first marking up the purchased product cost by aboul 15% to cover the cost of warehousing. distribution, and freight. Then it added another markup to cover the approximate cost for general: and selling expenses. plus an allowance for profit The markups were d el ermined at the start oll each year. based on actual expenses in prior years and general industry and competitive trend s. Actual prices to customers were tudilusted biased an long-term relatFoin ships and competitive situations, but were generally Independent of the speak level of service provided lo that customer. except for desic top del IVeries.Dakota had introduced electronic data interchange (EDI) in 19 9.9, and a new interne! srte in 2000, which allowed customer orders to arrive automatically so that clerks would not have to enter customer and order data manually_ Several customers had switched lo this electronic service because of the convenience to hem. Yet Dakota’s costs continued to rise Malone was concerned that even ntier introducing innovations such as desktop delivery and electronic order e Mir y, the company could not earn a profit He wondered about what actroris he should take to regain profitabilityGopyn•tli C 20011 by Me Pr Mu clam afig Fa OAS ur Harvard College. HarVWCOR11151he7.5Q1AKHACi 9-1Q-2-021 This case was irmaied by KarlaD Rater[ S., as ilhe ciesLi damt diszuszuon either khan rIlhar efilidlyfi of rtsgrialot el 3n aorninislratvresruati n Hapnrired by pe woman or Hantira EitarlMal School. Firma pirrrnIsBiian 1 D traduce granted by Harvard Business Sohod Pubirshing3


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