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Data Services, Inc. Huynh Thanh Phong – M987Z242 Nguyen Thi Thanh Nhan – M987Z232 Hoang Thi Ngoc Huyen – M987Z239. A large company by industry standards. Had experienced substantial growth over the past 20 years One of the first companies to automate its operations.
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Data Services, Inc. Huynh Thanh Phong – M987Z242 Nguyen Thi Thanh Nhan – M987Z232 Hoang Thi Ngoc Huyen – M987Z239
A large company by industry standards. • Had experienced substantial growth over the past 20 years • One of the first companies to automate its operations. • By 1990, it was operating two large, leased IBM computer. These computer usually operated close to capacity for two shifts, but the company had never been successful at getting its managers to schedule work for the third shift->a large block of largely idle time. COMPANY BACKGROUND Data services Armistead Insurance Company would find profitable uses for this third-shift computer time without interfering with the processing of normal operation. Provides data processing services designed especially for the fast-food industry, provide a comprehensive analytical service to those companies in the very competitive fast-food industry that could not afford to perform the function for themselves.
CURRENT DATA SERVICES PERFORMANCE Sales • Innitial installation of services • Various data summaries • Continuing operations • Revenue from the sale of paper forms to customers Competitor it was generally agreed that Data services faced only one competitor A subsidiary of the nation’s largest fast-food chain • had been established several years previously to provide computer services to its own outlets. • It had standardized its operations and had degun marketing its service to other fast-food chains in 1980 • In 1993, sales: were about 3 times as great as sales of Data services. • The rate charged: were comparable to the rates charged by Data services.
SALES AND MARKETING Sales • Data services ‘s top managers and their staffs performed Sales duties in addition to handling their general-management responsibilities. • They had recruited the 14 new customers acquired during the past fiscal year, • They had no established procedures for soliciting customers. • The managers spent a majority of their time visiting prospective buyers (average: 3 visits to a customer before one cooperation, spent 75% of working times on the selling function) • After a sale was made, on average an agent spent approximately 1 day each month with a new customer during the three months of the system implementation. • Occasionally: the system would have to be modified to meet the needs of a new customer. Fee: Data services was charge for their use of times of the corporate units A one-time charge per shift-reporting unit was made to each new customer in addition to the regular monthly rate -> this fee partially offset the costs of installation incurred by Data Services.
SALES AND MARKETING Marketing • Policy: grant volume discount to new customers based on the number of shift-reporting units in the customer’s systems • In practice: the discounts were not applied uniformly. They were not updated to confirm changes in the number of shift-reporting units per customer
OPERATION • Process: The company received sales and operations data from its restaurant customers enter that data into its files. processed data, making calculations of averages and trends. the reports, usually issued monthly gave customer managers information about their labor and material costs and identified trends in these cost. analyze the historical performance of any shift at any location, compare shifts within the company, and compare the company performance relative to the overall fast-food industry.
OPERATION • As monthly data were received from customers, the data were keypunched and fed into the computer. The file were updated, and reports were run. • Data control use a continuous process of manual of documents to detect any recording errors or computer malfunctions. Programmer continually performed program maintenance to fine-tune the system and to assure a smooth flow of information to all customers. • The service agents, in addition, periodically visited all customers and performed a supervisory and trouble-shooting function. • Each regular customer was visited about once a month. • For some special report that customer would ask occasionally, data services was happy to apply and then, were billed on a cost basis for those supplies.
Table 1: Results of Operations for the Year Ending Sep. 30, 1993 (in thousands of dollars)
Distribution of Expenses • Service Agents • Continuing Operations • Ave. Number of customers over year = 32 +(1/2 x14) =39 • 39 customers x 12 visits = 468 visits • Installation • 14 new customers x 3 visits = 42 visits • Total visits = 468 + 42 = 510 visits • $1,000,000/510 visits = $1,961 per visit • To continuing operations: 468 x $1,961 = $920,000 • To sales and installation: 50 x 42 = $80,000
Distribution of Expenses • Selling and general management • 75% of management and staff time x$1,800,000 = $1,350,000 • $1,350,000 to sales and installation • $450,000 not allocated
Distribution of Expenses • Travel • Management (Selling) • Service agents (installation) 14 customers x 3 visits = 42 visits • Service agents (continuing operations) 39 customers x 12 visits = 468 visits • Total = 294 + 42 + 468 = 804 visits • Expense per visit: $1,200,000/804 = $1,493 • To continuing operations: 468 X 1,439 = $ 700,000 • To sales and installation: 1,200,000 – 700,000 = $ 500,000
Table 2: Analysis of Revenue and Expenses (in thousands of dollars)
Table 3: Keep or Drop Decision(in thousands of dollars) If Data Services Inc. stops its operation, the company loss will decrease by $ 800,000
If Data Services Inc. stops its operation, the company loss will decrease by $ 800,000 • However, We also consider other alternatives for its operation. When we analyzed the expenses, we saw that the amount of expenses for continuing operations is large and can be reduced. So we suggest 3 alternatives on the reduction of this sort of expenses.
Table 4: Distribution of Expenses with 3 New Alternatives of Continuing Operations
Table 5: Profit (Loss) Calculation Including 3 New Alternatives of Continuing Operations (in thousands of Dollars)
Recommendations • It is common for a new established company not to get profit in some early years from its operations. • The drop decision of any company’s operation depends on many factors, especially company long –term strategies. In this case, we do not have enough data to suggest that the company should stop its operation.
Recommendations • We prefer the alternative of reducing the expenses of continuing operations to operation dropping alternative because it reduces more the loss of Data Service Inc. However, the company should do further investigation on how much expenses of continuing operations it reduce to be efficient, • Moreover, to improve its performance, it should strictly set up policies on the service fee and discount to easily control sales staff and calculate and forecast revenue.
