Omar Amman, the CEO of No Pain Corp (NPC), is under stress. They produce transcutaneus electrical nerve simulation units (TENS) for pain control. Amman faces a new opportunity and is not sure how to go about it. Recently, the the Department of Health of Canada has approved low current TENS devices to be sold directly to consumers without a doctor’s note. This will come into effect in three months. In the past, one needed a doctor’s note and could rent the device from some companies. These TENS machines, as they are called in Canada, are popular, since the older population has found them to be effective in pain control with almost no side effects. Amman can sell the device via drug-stores and pharmacies as well as on Amazon. But, Amman is not sure. Amman used to work as a supply chain manager for a power-tool company. Back then, it was a huge logistical “pain,” no pun intended, to work with large retailers and to attend to their fulfilment needs. Those retailers used to ask for small, frequent shipments to many locations. They needed a fast service, and they needed it to be faster and faster each time. If that was not hard enough, they needed RFID tags, shipping notifications in advance, inventory visibility, and on and on. They wanted deep volume discount and they were selling the same items for a marked-up price several times over. Amman didn’t want any of those headaches for NPC. He wanted a healthy profit margin for NPC, and believed that his customers would have received great discounts were NPC to directly deal with them via an e-commerce sales model. NPC needed a good online shop, easy to use, an ongoing and effective marketing campaign, and a best-in-class fulfilment capability if NPC wanted to compete with the herd of global TENS manufacturers who would flood Amazon and eBay in a few months. NPC has already designed and is producing three different models of the TENS machine in Hamilton, Ontario. Next to the production plant, NPC holds its inventory in its own distribution centre (DC). Everything is ready to go. As of now, NPC ships only to the companies who sell or rent medical devices. Amman believes that with a little bit of work, the same DC can be used to fulfil a global customer-base too. Amman asks everyone to come to a meeting to discuss a possible plan for their e-commerce model. He also is interested in their opinions regarding the fulfilment strategies. The supply chain management team at NPC agrees that a direct-to-customer approach is the best way to go forward, perhaps the only way. They came up with three alternatives to serve the Canadian market (at least for now): Option 1: Upgrade the Hamilton DC to serve as a fulfilment centre for the new customer orders Option 2: Build a few new fulfilment centres to complement the Hamilton DC/fulfilment centre; perhaps one in Calgary, and another one in BC Option 3: Find a capable 3PL for their fulfilment centre and focus on demand planning, manufacturing, and marketing as their own core competencies Amman needs to evaluate these three options and figure out which way is the best for NPC to go. The board of directors are going to ask him about his recommendation and he needs to be ready. Question 1: Future success: which option will give NPC the best opportunity in the long run? Why? Explain in detail.
No Pain Corp
Omar Amman, the CEO of No Pain Corp (NPC), is under stress. They produce transcutaneus electrical nerve simulation units (TENS) for pain control. Amman faces a new opportunity and is not sure how to go about it. Recently, the the Department of Health of Canada has approved low current TENS devices to be sold directly to consumers without a doctor’s note. This will come into effect in three months. In the past, one needed a doctor’s note and could rent the device from some companies.
These TENS machines, as they are called in Canada, are popular, since the older population has found them to be effective in pain control with almost no side effects. Amman can sell the device via drug-stores and pharmacies as well as on Amazon. But, Amman is not sure.
Amman used to work as a supply chain manager for a power-tool company. Back then, it was a huge logistical “pain,” no pun intended, to work with large retailers and to attend to their fulfilment needs. Those retailers used to ask for small, frequent shipments to many locations. They needed a fast service, and they needed it to be faster and faster each time. If that was not hard enough, they needed RFID tags, shipping notifications in advance, inventory visibility, and on and on. They wanted deep volume discount and they were selling the same items for a marked-up price several times over.
Amman didn’t want any of those headaches for NPC. He wanted a healthy profit margin for NPC, and believed that his customers would have received great discounts were NPC to directly deal with them via an e-commerce sales model. NPC needed a good online shop, easy to use, an ongoing and effective marketing campaign, and a best-in-class fulfilment capability if NPC wanted to compete with the herd of global TENS manufacturers who would flood Amazon and eBay in a few months.
NPC has already designed and is producing three different models of the TENS machine in Hamilton, Ontario. Next to the production plant, NPC holds its inventory in its own distribution centre (DC). Everything is ready to go. As of now, NPC ships only to the companies who sell or rent medical devices. Amman believes that with a little bit of work, the same DC can be used to fulfil a global customer-base too.
Amman asks everyone to come to a meeting to discuss a possible plan for their e-commerce model. He also is interested in their opinions regarding the fulfilment strategies. The
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Option 1: Upgrade the Hamilton DC to serve as a fulfilment centre for the new customer orders
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Option 2: Build a few new fulfilment centres to complement the Hamilton DC/fulfilment centre; perhaps one in Calgary, and another one in BC
-
Option 3: Find a capable 3PL for their fulfilment centre and focus on demand planning, manufacturing, and marketing as their own core competencies
Amman needs to evaluate these three options and figure out which way is the best for NPC to go. The board of directors are going to ask him about his recommendation and he needs to be ready.
Question 1:
Future success: which option will give NPC the best opportunity in the long run? Why? Explain in detail.
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