Sarak Wholesale: Wishing for Control

8 Pages Posted: 6 Jul 2017 Last revised: 10 Nov 2021

See all articles by Timothy M. Laseter

Timothy M. Laseter

University of Virginia - Darden School of Business; Emory University - Goizueta Business School; University of Navarra, IESE Business School; London Business School; New York University (NYU) - Leonard N. Stern School of Business

Abstract

The owner of a Cape Town, South Africa–based business, Sarak Wholesale Supplies, struggles to manage his cash flow and get his inventory under control (Sarak Wholesale has no formal order-cycle process). To improve the level of service Sarak Wholesale provided to its clients, he would need to formalize its ordering procedures.

Excerpt

UVA-OM-1570

Rev. Oct. 26, 2017

Sarak Wholesale: Wishing for Control

Sifiso Mulder looked through his inventory of goods, which he sold through his Cape Town, South Africa–based business, Sarak Wholesale Supplies. He had built the business through hustle and salesmanship…and perhaps a creative flair for figuring out what Cape Town tourists would find interesting. He supplied hundreds of entrepreneurial retailers, from the gift shop at Robben Island, to street vendors at Cape Town Stadium, to the shopkeepers at Bay Harbor Market in Hout Bay. None of his customers could afford a big inventory investment, so he had built his business through low costs and great service. Despite the growth in revenue—or perhaps because of it—Mulder struggled to manage his cash flow. He had convinced a few of his suppliers to provide inventory on consignment, but most required payment up front. Regardless, he knew that he needed to get his inventory under control if he wanted to make money. Because money was tight, he had started cutting back on inventory…but that had led to lots of out-of-stocks, which was hurting his reputation for customer service.

Framing the Problem

Mulder wasn't quite sure how to begin tackling the stock-out problem that had plagued Sarak Wholesale during the previous tourist season. He decided early on that his first goal should be to determine a reorder point for every stock-keeping unit (SKU) stocked by Sarak Wholesale to avoid missing sales revenue due to stock-outs without incurring needless costs. Mulder wasn't quite sure what would be an appropriate service level. He also wasn't convinced that the service level should be the same across all product categories. As an initial target, however, Mulder felt that Sarak Wholesale should have all standard gift items with the South African flag in stock and available for sale at least 90% of the time. He was less sure about the specialty with only the items that had the name of a particular destination like Robben Island or Table Mountain National Park printed on them. He thought such specialty items could have lower service levels because they were relevant to fewer customers.

. . .

Keywords: cash flow, inventory, order cycle process, inventory stock outs, ordering procedure

Suggested Citation

Laseter, Timothy M., Sarak Wholesale: Wishing for Control. Darden Case No. UVA-OM-1570, Available at SSRN: https://ssrn.com/abstract=2997756 or http://dx.doi.org/10.2139/ssrn.2997756

Timothy M. Laseter (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/faculty/laseter.htm

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1
Abstract Views
249
PlumX Metrics