Presented by :-

Asit Kumar Jena 1226109208

Pratheesh Gopan 1226109233
R V R Gopal 1226109236
Subhashish Ray 1226109252
Vineeth K 1226109258
 Audio duplication and distribution of CDs and
cassettes
 Customer base consists of large record companies
Major Customer : Big Record Company.
 Distributes to a wide variety of retail outlets
including:
 Music Stores, Wal-Mart, K-Mart, Best Buy,
Circuit City
 Has about 20% of the $5 billion market
 Two other biggest competitors share 40% of the
remaining market
 Retailers want record companies to manage and own
inventory until it is sold
 Record companies are asking for help from ADS with both
VMI and logistics
 Retailers have proposed that:
 Record companies decide album quantity and timing of
delivery
 Base decisions on POS data feed from retail outlets
 Record companies own inventory until it is sold

 ADS currently ships to retailers’ distribution centers and

retailers arrange for distribution to individual stores

 Retailers are providing incentives for ADS to direct ship to

stores, but this creates several problems:
 Cost, Infrastructure, Expertise
 ADS uses multiple carriers on a shipment-by-
shipment basis
 Inefficient, costly, and complex

 The future of audio duplication is in jeopardy

 On-line audio distribution (Napster, i-Tunes)
 Technological changes
 Piracy

 Record companies periodically review their contract

with its audio duplication service
 ADS must react in order to remain competitive
1. Why are ADS’s customers' customers moving toward
VMI arrangements?

 ADS's customers' customers, i.e., the national retailers,

want to reduce inventory holding costs and expenses
related to managing inventory by moving towards VMI
agreements.
2. How will this impact ADS’s business? How can ADS
management take advantage of this situation?

 The most significant impact on ADS's business will be

on its distribution functions because it will have to ship
directly to the individual stores instead of distribution
centers.

 Transportation costs will increase due to the increase in

the number of destinations.
 Depending on its agreement with the record companies,
ADS may incur additional inventory holding costs because
compact disks and cassettes will spend more time in its
system.

 ADS should take this situation as an opportunity to re-

design and streamline its operations and prepare itself for
the general trend towards VMI in the industry.

 This may help ADS to gain a competitive advantage, and

potentially increase its market share.
3. How should ADS manage logistics?

 Logistics is not a core competency of ADS.

 The management team of ADS must address more crucial

issues such as the emerging media distribution business
over the Internet.

 Therefore, ADS should outsource its distribution functions

to a third-party logistics provider in order to focus on
issues threatening its core business.
4. Why are the large national retailers moving toward a
direct shipment model?

 Under the present scheme, inventory belongs to the

suppliers until the products are sold.
 Also the present situation, add an unnecessary
complexity to the system as to how goods in the
distribution centers would be handled and ultimately
delivered to the individual stores.
 By encouraging direct shipments, retailers can reduce
the warehouse space they rent or own, and reduce costs
further.