What Is the Value Added by O&m?

What is the value added by O&M?

They own and manage the required inventory for the customer

They take the financial risk of carrying the large amount of inventory

They track and monitor customer prices along with demand and market data for manufactures

O&M also takes on the burden of selling the product and carrying the risk of accounts receivable

Evaluate the impact cost-plus pricing has on distributors, customers and suppliers.

There was a single fee of 7% for all products, which limited the distributor to make a profit on the order unless the order was of large quantity.

It allowed the customer to cherry pick their products, customers were buying the inexpensive products from the distributors while purchasing the higher priced items directly form he manufacture

The manufacture provided different pricing to the customer vs the distributors

The manufactures were giving discounts to distributors if they were willing to purchase large quantities, which was beneficial for the manufacture as they no longer have to carry the inventory. The distributors carried the risk and financial Burdon of carrying the inventory

Customers were utilizing the just in time method of shipment, impacting the distributors delivery costs.

What effect will ABP have on customer behavior?

If the customer would become more efficient, saving money through decreased overhead costs.

Customer would also gain more control over the quantities being ordered and utilizing the EDI system would allow for reduction in planning, ordering