Question

Silver Lining Inc. has a balanced scorecard with a strategy map that shows that delivery time and the number of erroneous shipments are expected to affect the company’s ability to satisfy the customer. Further, the strategy map for the balanced scorecard shows that the hours from ordered to delivered affects the percentage of customers who shop again, and the number of erroneous shipments affects the online customer satisfaction rating. The following information is also available:

• The company’s target hours from ordered to delivered is 40.
• Every hour over the ordered-to-delivered target results in a 0.5% decrease in the percentage of customers who shop again.
• The company’s target number of erroneous shipments per year is no more than 65.
• Every error over the erroneous shipments target results in a 0.5 point decrease in the online customer satisfaction rating and an added future financial loss of $500.
• The company estimates that for every 1% decrease in the percentage of customers who shop again, future profit decreases by $4,000 and market share decreases by 0.3%.
• The company also estimates that for every 1 point decrease in the overall online customer satisfaction rating (on a scale of 1 to 10), future profit decreases by $3,000 and market share decreases by 0.6%.

Using these estimates, determine how much future profit and future market share will change if:

• Average hours from ordered to shipped is 27.5.
• Average shipping time (hours from shipped to delivered) is 16.3.
• Number of erroneous shipments is 80.

Total decrease in future profit $37600(which was wrong)

Round your answer to two decimal places.

Total decrease in future market share 5.07%(which was wrong)

Answer 1

solution:

computation of changes in future profit:

Decrease in future profit = Additional future financial loss + Drcrease of customers who would shop again + Decrease in online customer satisfaction

= $7500 + $7600 + $2250

= $17350

the change in future profit is $17350

computation of change in future market share :

Decrease in future market share =decrease of customers who would shop again + decrease in online satisfaction

= 5.7% + 0.45%

= 1.02%

the change future market5 share is 1.02%

working note 1:

hours from ordered to delivery = hours from orderd to shipped - hours from shipped to delivered

= 27.5 + 16.3

=43.8 hours

the hours above the target average delivery time is 3.8 hours ( 43.8 - 40 hours)

working note 2 :

computation of decrase in percentage of customers who would shop again:

number of customers who would shop again = hours above the target deliver time * 0.5%

=3.8 * 0.5%

=1.9%

the decrease in percentage of customers who would shop again is 1.9%

working note 3:

compute the effect of erroneous shipment above target:

number of errors above the target = number of shipment errors - target errors

= 80 - 65

= 15 errors

working note 4 :

compute the decrease in overall online customer satisfaction rating is 0