Response to questions about Harvard Business Review Case #9-601-142 Moore Medical Corporation By dammars What problems and challenges are faced by Moore at the time of the case? Moore Medical is a medium-sized distributor of medical supplies to practitioners such as podiatrists and emergency medical technicians. Up to the time of the case, it has relied on traditional customer channels such as catalogs, phones, and faxes to communicate product offerings, promotions, and availability, and to take orders. It is owe attempting to transition into a “bricks and clicks” distributor with a strong Internet presence.
It has already made substantial investments in an commerce web site and In “back office” ERP software to Improve the fulfillment performance of its four distribution centers. The ERP software has not lived up to expectations In all areas, and the company must decide whether to Invest In more modules for this system that might address Its shortcomings. It must also decide whether to make a significant additional investment in customer relationship management software. At he time of the case, Moore must decide whether it has “enough” of the “right kind” of IT.
The decision is complicated by the fact that the company has recently made substantial IT investments that have impacted financial performance and caused organizational disruption. In addition, it is not clear that all of Moor’s known issues related to customer retention and satisfaction will be addressed by the Customer Relationship Management (CRM) under consideration. Problems and Challenges faced: 1 . Share of wallet of current customers was not close to 100% due In part because he company did not offer capital goods and has a relatively smaller product range as compared to the larger competitors. I. . It is not a big force in the market. 2. Churn rate for customers as high as 35% in some categories and 30% on an average whereas the industry standard was 25%. It was estimated that it was largely due to low customer loyalty and very high price sensitivity. 3. Split shipments were an issue due to excess cost ($2. 82) and wasted time. As a policy Moore Corp.. Absorbed the cost and did not pass It on to the customers. 4. Current ERP system, that was recently Installed, was not being fully utilized and lacked Important functionality that was key to overall demand planning success and customer satisfaction. He fact that the operating income and net income are in negative figures for the current year. If we assume website income of $554,732 per month and 13% of new customers added through website (rest 87% are old customers) then the investment has a payback period of 20 months. This figure is without considering the new hires and possible attraction of new customers through website. 6. Passive and reactive to demand rather than proactive in forecasting. The inventories in the four warehouses were thus ill managed and Moore had to resort to split shipping (17% of total orders) and backbreaking (10% of total orders).
What new systems/ modules should Moore purchase. Demand Planning Module/ Other ERP modules/ CRM/ no new systems. Justify and Explain Moore Medical Corp.. Has had “a strong tradition of accurately and quickly filling customer orders” thus maintaining close customer alignment and rightly so, since its business is primarily in distribution. They claim themselves to be Supply Experts and have the mission to ? Provide health care professionals with the supplies, tools, and resources they need to improve the health of their patients and save lives.?
They have always strives to maintain a strong customer focus and provide a multi- channel direct marketing experience. Since 1947, when they began selling brand-name pharmaceuticals from the back of a local pharmacy, they have evolved from a ? Brick and mortar? Company to a full service ? Brick and Click Enterprise.? The company has not done too well in terms of net income and operating income in he year 2000 and although it has no liquidity crisis but further investment in IT should be done cautiously.
We can now develop the Evaluation Criteria for the decision as follows: 1 . Cash flow analysis and the payback period for the investment. 2. Increasing the no. Of perfect orders. This includes inventory and distribution management through providing one stop shopping, fast order processing and shipment with increased reliability. 3. Reducing churn rate by gaining excellence in account and customer management through efficient and effective customer relationship management program. . Increase the share of the current customer?
