SCM880 Group 3 Case - Marshall Insurance ANALYSIS

Analysis Calculation of Employee Costs for assembly and distribution of physical Information Kits for new clients. Case states that two full time staff were paid $900 per week plus benefits. $900 per week (52 weeks per year assuming Marshall gives its employees 2 weeks paid vacation) Employee Salary Costs $ 900 per week× 52 weeks = $ 46,800 Health Benefits (Assuming an 80%/20% split) $ 13,493 × 0.8 = $ 10,794.4 Payroll Tax for Social Security and Medicare (6.2% and 1.45% respectively) $ 46,800 × 7.65% = $ 3,580.20 Total Cost of Information Kit Per Employee $61,174.60 2 Employees Approx $120,000 Note that is likely a slight underestimation as this calculation doesn’t include the employer portion of unemployment payroll taxes or any other fringe benefits that Marshall Insurance provides for its employees. The case states that 2,000 – 3,000 kits were assembled each week. A reasonable average would be 2,500 kits. 2,500 kits per week × 52 weeks per year = 130,000 kits per year . Cost of paper, printing and mailing the Welcome Kits 130,000 kits×$ 2 per kit = $ 230,000 Total Estimated Costs from physical Information Kits: 120 K + 230 K = 350 K Note we don’t consider the cost of utilities, maintenance and property taxes on the 3,000 square-foot because the case states that Marshall Insurance would convert it for other uses if it wasn’t used to store the kits. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/ historical#:~:text=U.S.%20health%20care%20spending%20grew,For%20additional%20information%2C %20see%20below . Payroll Tax: https://www.irs.gov/taxtopics/tc751#:~:text=The%20current%20tax%20rate%20for,Tax%20Guide%20for %20more%20information . Calculation for the “Gilmore Proposal” 130,000 Kits×$ 3 per kit = $ 390,000 Producing Kits in house costs about $350K . Outsourcing to Gilmore costs about $390K. Cost of Digitizing the Information Kits (Would likely include an initial upfront investment and then perhaps a paid monthly subscription to the 3 rd -party company)

It’s also important to state in the contract to the 3rd-party company, they cannot solicit or promote their services to MAC’s customers. Explanation of Decision Criteria (Subject to Change) Alternative 1 (Keep Welcome Kits In-House) Cost – Using physical welcome kits is costly as employee, paper, printing, and shipping costs are incurred as outlined above. Customer Service – Keeping Kits in-house allows Marshall to maintain high customer service. Kits are processed within 24 hours. Confidentiality/Privacy – Least risky since customer information is processed in-house. Sustainability (Can remove this category if it’s not relevant enough) – Trees are cut down to create paper for kits that customers (especially younger clients) probably won’t read. GHGs are emitted when the paper and ink are shipped to Marshall and then again when Marshall mails the kits to their customers. Kits and ink cartridges may end up in landfills. As a company they can create certain measures to minimize these issues and build their reputation Alternative 2 (Outsource Information Kits to Gilmore) Cost - $3 per kit, approximately 130,000 kits per year. Customer Service – Gilmore will likely do a good job ensuring that kits are processed in a timely manner, but Gilmore provides these services to other large corporations and there’s no guarantee that in busy or unprecedented times that Marshall’s clients will be prioritized over other companies. This means that there’s always going to be a small risk that some kits don’t get processed right away. Confidentiality/Privacy – Somewhat risky because customer information is being handled by a 3 rd party. Would need to state in the contract that Gilmore CANNOT solicit or contact Marshall’s clients or use for any other purposes. Sustainability: As environmental consciousness grows among consumers and the general public; companies are increasingly sensitive to their environmental reputation. If Marshal is associated with a supply chain partner that is perceived as environmentally irresponsible, it could damage Marshal’s reputation and brand image. Alternative 3 (Outsource to a 3 rd Party to Digitize the Kits) Cost – Lowest Costs, no physical inventory, no cost of shipping, no employees to assemble and administer. Customer Service – Kits can be autogenerated from customer signup information and emailed immediately. Confidentiality/Privacy – Riskiest because customer information is being handled by a 3 rd party and is digital which leads it vulnerable to being hacked. Would need to state in the contract that 3 rd -party CANNOT solicit or contact Marshall’s clients. Would also need to review 3 rd party’s privacy and encryption policies to ensure safety of customer data. Ensure that the third party complies with relevant data protection laws and regulations. Include clear data protection clauses and compliance requirements in your contract. Regularly review and update agreements to reflect changes in regulations.