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    ACD Case Write Up

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    Ayush Rai
    ACD Distribution, Inc. was created to distribute role-playing game products and exploited arbitrage opportunities. It functioned as a secondary distributor with a small inventory and served as backup for larger distributors. After operating for years out of a dorm room with few employees, ACD had expanded significantly. The owner, Kummer, must now determine how to adjust operations as ACD transitions to a primary distributor to meet increased demand and inventory needs. Expanding operations to the West Coast could capture new customers, reduce reliance on one major customer, and allow ACD to better compete with its largest competitor.

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    © All Rights Reserved
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    ACD Case Write Up

    Uploaded by

    Ayush Rai
    483 views2 pages
    ACD Distribution, Inc. was created to distribute role-playing game products and exploited arbitrage opportunities. It functioned as a secondary distributor with a small inventory and served as backup for larger distributors. After operating for years out of a dorm room with few employees, ACD had expanded significantly. The owner, Kummer, must now determine how to adjust operations as ACD transitions to a primary distributor to meet increased demand and inventory needs. Expanding operations to the West Coast could capture new customers, reduce reliance on one major customer, and allow ACD to better compete with its largest competitor.

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    ACD_Case_Write_Up.docx

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    ACD Distribution, Inc. was created to distribute role-playing game products and exploited arbitrage opportunities. It functioned as a secondary distributor with a small inventory and served as backup for larger distributors. After operating for years out of a dorm room with few employees, ACD had expanded significantly. The owner, Kummer, must now determine how to adjust operations as ACD transitions to a primary distributor to meet increased demand and inventory needs. Expanding operations to the West Coast could capture new customers, reduce reliance on one major customer, and allow ACD to better compete with its largest competitor.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    483 views2 pages

    ACD Case Write Up

    Uploaded by

    Ayush Rai
    ACD Distribution, Inc. was created to distribute role-playing game products and exploited arbitrage opportunities. It functioned as a secondary distributor with a small inventory and served as backup for larger distributors. After operating for years out of a dorm room with few employees, ACD had expanded significantly. The owner, Kummer, must now determine how to adjust operations as ACD transitions to a primary distributor to meet increased demand and inventory needs. Expanding operations to the West Coast could capture new customers, reduce reliance on one major customer, and allow ACD to better compete with its largest competitor.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    ACD Distribution, Inc.

    Case Write-Up

    Abena Akuffo-Akoto
    September 9, 2022

    ACD Distribution, Inc. was created as a ‘fantasy’ or ‘comic’ role-playing game products distributor

    in a niche industry. He exploited an arbitrage opportunity when he bought a popular card game called

    ‘Magic’ and resold it profiting from the margins. At its inception, ACD functioned as a secondary

    distributor allowing it to carry a small inventory and serve as backup to the larger industry distributors.

    In this way they created value in several ways. First, in efficient activities and processes and captured this

    value in low operational costs. For instance, Kummer ran the business out of his college dorm room and

    staffed it with friends and other students. After operating for a while, ACD had expanded, carrying

    15,000 SKUs and a staff of about 40 employees. Second, ACD created value in low coordination costs

    and captured the value in long-term relationships with the retail stores. They operated out of one

    warehouse using fax, telephone, or email for orders. The orders were then shipped commercially to

    retail stores keeping coordination costs down. The captured value is evident in Kummer growing the

    business to almost $15 million in sales within 8 years.

    Kummer is now grappling with the long term viability of the business. I believe that the business

    is viable in the long term with the proper adjustments to operations. The business has thus far made a

    profit every year of operation [See Exhibit 1 Gross Profit]. The cost of operations has remained relatively

    low at 3.87x in 2002 while industry average sat at 3.8x and cash on hand/liquid is decent. In 2003, the

    company had a working capital at $2.41 million. This positive working capital indicates that a company

    can fund its current operations and invest in future activities and growth. These are tangible value that

    make long term viability a real possibility for ACD.

    Due to their transition to primary distributor, ACD is going to have to adjust their operations a bit

    to meet the increased demand and inventory requirements. Expansion may be the solution to this

    This study source was downloaded by 100000833927171 from CourseHero.com on 11-24-2022 14:10:11 GMT -06:00

    https://www.coursehero.com/file/170265653/ACD-Case-Write-Updocx/
    challenge. ACD should expand to the West Coast to capture new customers and better service current

    customers. ACD is currently exposed to one major customer. To reduce this exposure, it would be a good

    idea to expand to the West Coast and gain additional customers. By adding a West Coast operation, they

    will greatly improve their delivery time from 5 to 2 days in most cases. Fast service in this particular

    industry is critical as customer interests are highly volatile. Expansion to the West Coast will come with

    obvious increased costs but with the type of cash and profits ACD has, this should be possible.

    Additionally, their biggest competitor Alliance has a presence on the West Coast and to be able to

    compete, ACD will have to match them on location as much as they can.

    ACD could be a formidable player in this industry if it is able to compete with Alliance. If ACD can

    expand operations to the West Coast, meet the increased demand and inventory requirements, they will

    be formidable. The West Coast market appears to be relatively large and growing. I would even go so far

    as to say merging with some of the smaller players to increase ACD’s market share should also be

    considered. This consolidation would attract larger retail stores and raise the profile of ACD. ACD could

    raise some of the funds for an expansion by finding efficiencies in the current operations and due to

    their good financial position appeal to investors or banks. The downside would be the dilution of

    Kummer’s ownership interests, and the new investors would need him to account for inventory decisions

    differently. If Kummer decides he doesn’t want to deal with the downside of outside cash infusion, he

    could always start his West Coast expansion as he did in the Midwest from a small cheap location until

    he builds significant clientele and operations. I believe expanding operations to the West Coast is

    essential for his next steps to grow ACD.

    This study source was downloaded by 100000833927171 from CourseHero.com on 11-24-2022 14:10:11 GMT -06:00

    https://www.coursehero.com/file/170265653/ACD-Case-Write-Updocx/
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