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Northlake Bookstore

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Submitted By BillyPoku
Words 1645
Pages 7
Question 1

Northlake’s income statement for 2004 shows a healthy increase of 2.6% to 12.1% of net income over the previous years. Industry wide, there has been shrinkage in sales and Northlake is no exception. Northlake has managed to keep shrinkage at 1%. Sales per FTE student are very high/good. Sales per FTE employee are lower than expected. Sales per square foot of total space low as well, 60% of average. Management had managed to control costs in all categories. Inventory was being kept lower than average with good turnover in all categories except software and accessories and supplies and sundry. A look at other performance measures however show some causes for concern. Percent of textbooks available first day had inched up slightly, as had textbook sell through even though both were still relatively low. Days textbooks in receiving area was now at 10 and cartons processed per employee hour down to 3.3. I would recommend that days in receiving area be steadily reduced to reduce inventory costs. And also increase employee morale to increase productivity. Alternatively FTEs in the receiving area may need to be deployed elsewhere or cut. Customer queuing time had been halved in the 2 years. GMROI was also up. Comparing Northlake’s progress to NACS benchmarks reveals several areas that could do with improvement. Most notable is the sale of used course books. Northlake lags the industry average of 20.7% by 7.3%. This is a big contributor to the lag in total book sales 67.8 vs 72.7%. Percentage of used text sales per new text, and course book sales were both lower than average, 28.70% and 20.70% respectively. Northlake should be putting more effort into the sale of books and used books in particular. The margin on used text books is healthier than that on new textbooks and so Northlake should be putting in more effort to acquire and sell used textbooks. With new text prices rising so rapidly there seems to be a good market for old books that has not been fully exploited to date. In sales volume of supplies and sundries, Northlake does not seem to be doing too well at 6.3% vs 12.5%, their margins however are better than the NACS benchmarks. Northlake’s computer hardware sales contribute 4.6% to sales margins versus an industry average of 7.3%. Northlake’s sales volume for computer hardware is however higher than the industry average.
A closer look at Northlake’s performance from 2002 through 2004 shows some interesting trends. Class notes sales have been declining slowly but steadily as have supplies and sundry, the latter in contradistinction to industry wide trends. Computer sales declining but their gross margins even more so. Even though Northlake’s computer sales make up more of its income than industry benchmarks, the GM on those sales is below the benchmark. Northlake may have to reassess what kinds of computers it sells and in what price range, may have to renegotiate with wholesalers. Northlake’s only selling half the supplies and sundries as expected. It does have healthy gross margin for that department. I would recommend increased efforts at selling supplies and sundries. Average store area to FTE student 50% more than average. Reduce space and save on rent.

Question 2

Short term goals would be to increase employee productivity, increase employee satisfaction, reduce employee turnover, increase employee training hours, increase sales of used books, increase supplies and sundries, Improvement in customer service, get professors to decide early on books.
Measures,...

Question 3

Northlake should be benchmarked against the 75th percentile. The Bookstore is quite well run and has been regularly turning in increasing profits which currently lie above the 75th percentile. Benchmarking against anything lower risks reducing management's drive to do better since their bottom line is already above that.

If Northlake were experiencing financial difficulty, I would recommend benchmarking against the 50th percentile. This would represent average performance which psychologically would not seem to be too far out of reach. That way employee morale would not suffer.

Question 4

I would suggest that Northlake benchmark its superior performance selling customer materials against itself, against previous years’ performance. That performance can be looked up in the NACS tables to determine the appropriate percentile. As things stand now, Northlake is doing very well in this department and is way above most college bookstores. Any benchmarking against lower percentiles runs the risk of getting the employees complacent, an attitude which could bleed into other departments. The other issue is that this department at current performance levels helped raise the bottom line to where it is now. It made up for other weaknesses that Northlake has. It would be unwise to let this decline.

Question 5

Since this other bookstore is in the immediate vicinity, the product lines should be benchmarked to local comparison points. This assumes the data from the other bookstore were available. It would be no good for Northlake to favorably compare on a national benchmarking scale when a competitor in its neighborhood were doing a lot better selling those same goods. The most pertinent and best market for those items is there in Northlake and the surrounding areas. This would be a direct comparison of same good sales in the same market.

Question 6

Northlake bookstore has done well financially. To continue doing so, I would recommend that it keep up those areas of stellar performance whilst improving the not so stellar departments. I would recommend benchmarking the store to the 75th percentile if not higher.
For a start, I would recommend a reduction in size of the store to fall more in line with national benchmarks. They would be able to save on rent that way. Alternatively, the space could be used for other value adding activities such as a café with internet services enhance the bookstores business whilst at the same time increasing total revenue.
Employee FTEs may need to be reorganized or reduced as sales per FTE employee seems to be on the lower end of the scale. Additionally, cartons processed per employee hour is on the decline, which could be attributable to overstaffing or perhaps longer staff hours worked. I doubt that the hours worked are longer, given that the bookstore is open shorter than the industry average. Days in receiving area needs to be watched closely and reduced. Books are sold in the store and not in the receiving area. Another option would be to have more employees manning the cash registers to further reduce customer wait times. Employee education and training to help increase productivity all around should be considered. Employee satisfaction surveys to help improve morale and reduce turnover should that be a problem. Employ more students part time to help with peak demand. An added advantage; students know what students need to help drive sales. Institute a staff incentive system based on performance. Periodic reinforcement of sales techniques in those areas that the store excels would keep up margins. Northlake could do better with internet orders. They could start by contacting all freshmen and families by email once admitted and offer to have course material ordered and delivered online. Northlake average book prices are generally above other online competitors'. Management may want to adjust those prices, or create incentives to drive students to buy on the Northlake website. Such incentives could include some free sundry items or deals on other merchandise. The store management could get with professors and work out a way to accurately order books for upcoming courses in a more timely manner. That would help control ordering and cut back days in inventory for books. On the topic of days in inventory, software and accessories as well as supplies and sundries will need to be better controlled as well. The store would be well advised to implement a year round book buyback program to help satisfy the need for used books. This would also go towards improving customer satisfaction scores. Northlake management need to investigate the eBook industry business models to see how it could also benefit from driving student traffic there. Further, as far as used books are concerned, it would help students control costs if older versions of texts were used longer. Newer versions appearing every other year usually do not have much significant changes. This would need buy-in from the faculty staff. Northlake sells more custom material than the industry average however gross margin lag slightly behind those of the industry. This is obviously special order merchandise and should Northlake choose to continue this, at least they should require a commensurate increase in margins to industry average. Even though Northlake does not have high margins for computer equipment I would recommend against getting rid of that department. Software and accessories sales contributed a significant margin and it would be conceivable that getting rid of hardware would have a bad impact on software sale. Rather Northlake could look again at the differences between its hardware offers and that of comparably sized college bookstores in the nation. Any differences noted in this comparison and addressed could help raise the income from hardware. Hardware inventory should be kept to a minimum. Northlake needs to work harder at supplies and sundries perhaps by increasing its offerings. The margins are good however sales in this department only make up 6.3% of total sales, well below industry average. Northlake can institute a system of rotating special offers to highlight those departments that are currently under performing. Customer surveys may help show what customers need and analyzing historical data will inform what sells well by season so Northlake is well stocked and ready at all times. North Lake is lucky to have as manager Wendy Wiley with her Walmart experience. Perhaps she could selectively use some of that experience to help get n forward.

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