Describe the nature of CPDW problem
Determination and implementation of appropriate performance metric that would translate into financial success and indicate real financial situation of the company were the main problems for the CPDW. It is essential for a logistic service provider to appropriately determine performance metric because of associated functional complexity (Coyle, Langley, Gibson, & Novack, 2012). Current space utilization based performance metric was giving wrong picture of the overall performance and financial condition of the company. The logistics facility was completely filled with pallet-loads of glass from local glass manufacturer. The utilization of the storage space went beyond original estimates of 99, 500 square feet to 110, 000 square feet. The increased space utilization was supposed to yield increased profitability but the company could not realize expected profit. The reason for the problem is obvious. Because of the low ceiling height of the facility, the distribution and warehouse facility is not appropriate for storage services. Therefore, the warehouse is likely to result maximum yield if it can be used for mix logistic services including repacking, order fulfillment, and reverse logistics. The pallet-loads of glass were using the space as storage house. Instead of piling up because of low height of ceiling, they were crowding the floor space inefficiently and leaving no spaces for other services or even moving the pallets. The financial performance of the company was reflecting the inefficient use of the space. CPDW is failing to reach break-even point.
What metrics would you recommend that CPDW use to enhance its pricing strategy?
Based on current situation of the business, construction of the facility and available resources of CPDW, Service should be a good performance metric for the company. The company should focus on evaluating its service to measure its performance and should align it with its new pricing strategy. The company should periodically evaluate its service based on the volume of products moving in and out in a given period of time. It should try to increase its service provided to consumers. For instance, rather than focusing on dealing with increased volume or using large space of the facility, the company should try to concentrate on moving product in and out rapidly to make spaces available for incoming consumers. Obviously, the increased service would result in increased clients and increased profitability.
Provide a rationale for your recommendations
A good performance metric includes many essential features. It should be easily measureable, incorporate employee involvement, simple to understand, should focus customer needs, aligned with corporate strategy of the business, and include economics of effort (Mentzer, 2001). Considering all these factors, service is an appropriate performance metric for the company because it is easily measureable in terms of increased clients, involves employee participation, easily understandable to the management and it is focused on the increased profitability of company. This performance metric would keep CPDW right on track by enhancing its service, which would result in efficient utilization of its space and increased delivery of services. The company can develop its strategy based on increased services and plan for maximizing its profit with enhanced service. Providing support to different logistic and reverse logistic services, the company might avoid its limitation of low ceiling height or poor storage service performance and significantly improve its financial condition.