Use This Information for Questions That Refer to the United

question 134

Multiple Choice

Use this information for questions that refer to the United Tools case.
Terry Harter is marketing manager for United Tools and Mike O'Reilly is the firm's logistics manager. They work together to make decisions about how to get United's hand and power tools to its customers - a mix of manufacturing plants and final consumers (who buy United tools at a hardware store) . United Tools does not own its own transport facilities and it works with wholesalers to reach its business customers.
Together, Harter and O'Reilly try to coordinate transporting, storing, and product handling activities to minimize cost while still achieving the customer service level their customers and intermediaries want. This usually requires that United keep an inventory of most of its products on hand, but demand for its products is fairly consistent over time so inventory is easy to manage.
Harter has identified four options for physical distribution systems she could use to reach two of her key wholesalers, Ralston Supply and Ricotta Tool Co. The total cost for each option--and the distribution service levels that can be achieved--are as follows: Ralston Supply expects a very high level (90 percent) of distribution customer service. Ricotta Tool Co. is willing to settle for a 70 percent customer service level, even if that means some products will occasionally be out of stock, if it gets products at a lower price.
For its large retail hardware customers (like Home Depot) , United regularly ships smaller orders directly to individual stores or in some cases to the retail chain's warehouses. Cross-country shipments usually go by rail while regional shipments usually go by truck.
-It appears that United Tools:

• A) is implementing the physical distribution concept.
• B) works to provide just-in-time delivery to both of its wholesalers.
• C) needs to buy its own fleet of trucks.
• D) uses the distribution system with the lowest transportation cost.
• E) all of the above are logical.

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Definitions:

Firm's Debt

A firm's debt refers to the amount of money that the company owes to creditors. It is a key component of a company's capital structure.

Wall Street

A street in Lower Manhattan, New York City, known as the financial district's heart, home to the New York Stock Exchange and symbolically representing the American financial markets.

Office Space

The area or rooms used for business activities or work, typically in a building designated for commercial or professional use.

Accounting Profits

The difference between total revenue and explicit costs, reflecting the net income reported on financial statements.