Tim Bo Company

Tim Bo Company

The Tim Bo Company has fallen on bad times. Tim Bo, a maker of specialty hotel

equipment, has sales totaling $69 million, but sales are declining while costs continue

to increase. If things continue in this direction, Tim Bo soon may have to close its

doors.

At a special management meeting, the president lays it on the line! He demands

that the firm break even in the remaining quarter of the year. For next year, he calls

for profits of 15 percents, a 20 percent increase in sales, and deeper cuts in labour,

material and overhead. Later in the day, the president calls Mr. Chow, director of

supply management, in for a discussion.

“Mr. Chow I want your supply management people to carry the ball at the start of

the game. We can’t get sales moving for nine months. But you can improve your

housekeeping – and Tim Bo’s profits – right away. Just think what you can do to that

chart! Every penny you save is profit! So take a close look at what you buy. I don’t

care how you make your savings – by negotiations, inventories, imports, anything.

But put the screws on tight – right away!

“Start with inventories, they are sky high. So get together with manufacturing on a 10

percent cut! We’ve got $20 million worth of materials stashed away around here, and

a 10 percent cut would save at least $450,000 a year in carrying charges. At the same

time, get your payroll and operating expenses down 10 percent. That is in line with

our company-wide cutback. I know this hurts, Mr. Chow because you’ve got some

mighty fine people here in supply management, but we can’t be sentimental these

days. Our overhead had got to come down – or we are dead!

“I’m having an executive committee meeting in one week. Have your plans ready by

that time! We’re betting on you, Mr. Chow. You’ve got to get us out of the hole. I

know you can do it.”

Mr. Chow starts a review of his purchases, which total $39.7 million per year. Tim Bo

buys a wide variety of...