Case Stud Powell Logistics
Assignment #3: Powell Logistics Case Study A. Defining the affair The actual affair is to accomplish a accommodation on the approaching of the ancestors company. B. Analyzing the Case Data * The barter busline industry is a basic allotment of the Canadian abridgement with $43 billion in sales annually and employing 400,000 bodies * The for-hire area accounts for 40% of the busline industry in Canada * The for-hire area has 2 account offerings: TL – Barter load, alone abounding amount amid 2 locations and LTL – Less than load, aces up from assorted locations accommodate again bear to end customer.
Traditionally LTL allegation more. * Trucking industry experiencing 3 above issues * Amount of fuel, added operating costs afflicted to apparatus ammunition customs * Canadian dollar amount admission over US dollar, afflicted amount advantage of Canadian bogus goods, abbreviating alteration of appurtenances amid Canada and US * Shortage of able truckers with crumbling workforce, accretion accomplishment * Strong antagonism in trucking: Traveller’s Busline Services, connected continuing aforementioned bazaar as Powell, account alms included baby chump orders application vans which Powell did not action * Yellow Transportation, all-around competitor, about traded with ample banking resources, aerial technology application online accoutrement abbreviation costs * Powell in operation back 1979, with abiding growth, with a agile of beeline trucks, tractor trailers and allowance services. * License to backpack accepted bales throughout Canada and the US. Midsized aggregation assuming cogent profitability, absorption on LTL casework for college margins alike admitting added accomplishment and ability was appropriate to administer the endless * Advanced technology including celerity and accessory tracking in abode as able-bodied as all-encompassing trucking acquaintance * Ancestors business with earlier son acting as Vice President of Operations with abounding years of acquaintance and no academic business training, babe with academic apprenticeship branch up the Human Assets area of the business and the youngest son amenable for Sales and chump relationships. Current operations included year annular business with little melancholia fluctuations * 80 drivers alive 5 canicule per anniversary * Endless were best up from area A and delivered to one of 5 warehouses, placed on addition barter with optimized avenue for area B (software apprenticed avenue optimization) * Sales advance would trend the aforementioned for the abutting year as the previous. C. Generating Alternatives 1) Buy New Barn and Combine Operations Pros: Reduction in costs including rent, labour, fuel, and administering bacon costs.
Cons: A absolute $10 actor advance was appropriate to awning $2 actor for the acreage and $5 actor accommodation financed at 5% annually. 2) Sell the Business Pros: There is interest, business is all-embracing accomplishing able-bodied and the timing is appropriate in adjustment to get as abundant amount through selling. Cons: Direct admission to banknote breeze stops and the ancestors associates assignment approaching is jeopardized. 3) Pass the business on to his accouchement Pros: The 3 Powell accouchement are and accept been heavily complex in the ancestors business anniversary accepting their own expertise. Cons: Who to baddest as the CEO from the 3 Powell children.
D. Selecting Accommodation Criteria: * John Powell wants to retire * The family’s absorption is of absolute accent * Advance banking position of PLI * Decrease operating costs through streamlining operational costs * Decrease liabilities and pay bottomward on debts to advance leverage. * Maintaining their aggressive advantage/specialty in the LTL carriage service. * Provide connected application for the Powell children. * Maintaining their loyal customers. E. Assessing Alternatives: 1. Buy New Barn and Combine Operations STRENGHTHS| WEAKNESSES| Industry acquaintance * Decrease operating costs| * Connected appellation debt * Some added connected appellation debt from another Powell companies still outstanding throwing off debt ratio| OPPORTUNITIES| THREATS| * Accumulate Operations| * Economic abatement * Competition| 2. Sell the Business STRENGHTHS| WEAKNESSES| * Absorption from 3rd affair * Pay off all Powell Debt | * Ancestors affiliate assignment approaching ambiguous * Banknote flow| OPPORTUNITIES| THREATS| * Partnership possibility| * Economic downturn| 3. Pass the business on to his children
STRENGHTHS| WEAKNESSES| * John Powell retires * Powell accouchement accessible and able to booty on the ancestors business * Chump abject charcoal * Restructure and plan to accumulate and accretion on debt ratios | * Multi armpit inefficiencies still exist| OPPORTUNITIES| THREATS| * Plan to accomplish banking position to abutment new barn in the approaching * Restructure plan development| * Economic downturn| F. Selecting the Adopted Another Passing the business on to his accouchement is the adopted alternative. Banking Analysis Although PLI is forecasted for connected advance with acquirement accepted to ability 28 actor dollars in 2010, PLI still faces the botheration of shrinking net assets due to cogent increases in their operating expense. * Closer assay shows that PLI’s expenditures in Administrative Accomplishment and Benefits are ascent dramatically, and they’re the capital contributor to the admission of Operating Expenses. Operating Costs as a allotment of Absolute Acquirement is out pacing the advance of Gross Revenue, and it won’t be abundant best afore Operating Costs abate Gross Acquirement and put PLI in the red. The Balance Sheet shows the asset ethics for ‘related companies’ has decreased by 19. 9% from 2006 to 2007, but the debt these ‘related companies’ accept incurred has added badly by 93. 1%, This is acutely putting a amazing ache on PLI’s banking health. * A accumulated warehouse/main appointment will abate bacon costs with accumulation projected at $60,000 per year. If PLI were to booty a 10 actor dollar accommodation amortized over 25 years to apprehend an admission of $60,000 per year to their Operating Income, they would be able-bodied abbreviate of their $400,000 anniversary assumption payment. Additionally, PLI would best acceptable alone be able to access a aerial accident absorption amount a lending academy would not accept this accommodation accustomed the abbreviate accumulation margins of PLI in an acutely aggressive market. * When reviewing the banking ratios, we acquisition PLI awful leveraged, and they will be in a actual ambiguous position if there was a allowance alarm on their debts. * The accretion debt of PLI will best acceptable abate any achievability of a leveraged expansion. G. Developing an Action and Implementation Plan Who| What| When|
John Powell| Frank Powell called as almsman and President of PLI| Nov 2007| Frank Powell| Corporate restructure advertisement to abate staff, accomplishment and/or operating expenses| Jan 2008| Frank Powell| Sell Powell accompanying businesses that are accretion debt accountability on PLI. Sales gain pay bottomward debt and any costs associated to restructure| Dec 2008| Frank Powell / Ryan Powell| Review and apparatus new ante and account offerings to ensure these attempt with competition| Jan 2009 to July 2010| Frank Powell| Revisit $10 actor amplification project| July 2010|
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