A Sample Internal Proposal


WEEKS, INC.


To: Ted Weeks, Vice President
From: Rick Dinkel, Audio Manager
Subject: Acquiring Records & Tapes, Inc. as a new audio supplier
Date: July 16, 1984

PURPOSE

This report proposes a means of increasing the proficiency of the Audio Department through the reduction of costs while increasing service, expanding sales, and boosting profits.

PROBLEM

For the past 9 months, sales have been fluctuating sporadically with lows of $600 per month to highs of $1,000 per month, but never able beyond this peak. The reason for this erratic behavior in sales, and not a steady increase as predicted, can be attributed to the high costs and lack of service from our present supplier, Eklund Enterprises, Inc.

Since becoming Audio Manager 9 months ago, sales have increased by over 400% and would continue to increase if not for our present supplier. In ordering merchandise from Eklund, it takes a minimum of 2 weeks to receive the shipment from Kansas City, where as our competitors get theirs within 3 or 4 days. While we are waiting, they are selling out. And, when the shipment finally arrives, half of the order is not there, leaving us without many of the top sellers. This occurs frequently, especially when placing an order for advertised specials.

Though the lack of service is a major problem, it is not the only one, for the prices we are being charged are also ridiculous. The prices, which we are paying are of the same caliber as that of a rackjobber(a company that completely takes care of the record department within a store). This not only cuts gross profits, but also wastes store dollars.

SOLUTION

To utilize the money designated to the Audio Department more efficiently, Weeks, Inc. needs to take immediate action in replacing Eklund Enterprises, Inc. as its main audio suppliers of records, tapes and accessories. Records & Tapes, Inc. would be a fine replacement. By switching to Records & Tapes, we would not only be able to offer better service to our customers, but also push sales to a new record high.

BENEFITS

The service offered by Records & Tapes, Inc. is above exceptional, for their next day service on all orders placed before 2 p.m. would put us way ahead of our competition in this department. We would easily have our shipment the next day since they are practically at our backdoor(Omaha, Nebraska).

Another plus is that Records & Tapes is one of the largest suppliers of audio in the nation. They not only carry virtually every record label in stock, but also 40 lines of stereo and video equipment as well as a vast selection of blank tapes and accessories. This not only enables them to fill any order we will ever have with ease, but also gives us a head start in merchandising the new releases hot off the press and capture part of the market before many of our competitors receive their shipments.

COST SAVINGS

Their service is not the only outstanding feature, for Records & Tapes prices can not be beat. In comparing prices with those charged by Eklund Enterprises, Inc., a noticeable price advantage can be seen, especially those with a suggested retail price of $ 8.98(which constitutes about 75% of the total dollar sales in records and tapes), as shown below:

Eklund Prices vs. Records & Tapes Prices
Suggested Retail Price Cost From Eklund Enterprises Cost From Records & Tapes Savings Per Unit
$ 1.98 $ 1.30 $ 1.28 $ .02
4.98 3.30 3.20 .10
5.98 4.00 3.82 .18
6.98 4.95 4.57 .38
7.98 5.65 5.16 .49
8.98 6.47 5.77 .70
9.98 7.19 6.47 .72
10.98 7.91 7.10 .81
11.98 8.63 7.70 .84
12.98 9.35 8.47 .88
13.98 10.07 9.12 .95
14.98 10.78 9.77 1.01
15.98 11.51 10.41 1.10

Though the savings per unit seems quite impressive, it can not truly be realized unless it is illustreated as as whole. Below is a listing of the average sales for a month. It is broken down to show the quantity sold, cost and savings per item as well as the total costs, sales, savings, and profits for a month.

An Average Month
Comparing Eklund and Records & Tapes
Suggested Retail Price Avg. No. Sold Per Month Our Retail Price Our Cost (Eklund) Our Cost (R. & T.) Total Sales
$ 1.98 56 $ 1.55 $ 1.30 $ 1.28 $ 68.80
4.98 2 3.89 3.30 3.20 7.78
5.98 3 4.99 4.00 3.82 14.97
6.98 1 5.99 4.95 4.57 5.99
7.98 1 6.59 5.67 5.16 6.59
8.98 85 7.20 6.47 5.77 619.65
9.98 5 8.59 7.19 6.47 42.95
11.98 1 10.29 8.63 7.79 10.29
12.98 1 10.99 9.35 8.47 10.99
13.98 1 11.99 10.07 9.12 11.99

Total Sales = $818.00

Total Cost = $712.97 $647.45

Total Profit = $105.03 $170.55

Pct Markup = 12.84% 20.85%

Increase In Profits = $65.52

Increase In Pct. Markup 8.01%

This clearly illustrates that by switching to Records & Tapes, Inc., the Audio Department can be very profitable. With the lower costs and better service from our supplier, we will be able to lower our prices, run more specials, and thus please more customers. By doing this, we will inevitably create greater sales and generate larger profits.

CONCLUSIONS

On the basis of these details, I firmly believe that by switching to Record & Tapes, Inc, would mean only success for the company. Not only would it make our customers very happy when lowering prices, but it would also create greater sales while maintaining higher profits and thus making "the boss" very happy as well. I would like to meet with you on Friday to discuss this plan in detail and to answer any questions or gather any additional information which you may desire. Please let me know if we can get together to discuss this proposed change. Remember, the quicker we can address this issue, the sooner we can better serve our customers, whom in turn will better serve us.

Rick L. Dinkel

Audio Manager