Case study
\nYaw Mkt Pty Limited (YML)
\nIn late 2008, Yaw Mkt Pty Limited (YML) was incorporated by a team of three entrepreneurs \u2013 Kathy Lopez, Sharron Ho and Tyler Carroll. They used their combined skillsets to establish the company website, YawMkt.com.au, which supplies surfing-related products, including clothing, surfboards, surf skis and accessories.
\nYML was incorporated during the global financial crisis. At the time, each of YML’s three entrepreneurs had been made redundant from their well-paid executive jobs. Kathy had been the Asia-Pacific head of operations for a US-listed warehouse and logistics company, while Sharron had been the head of information technology for a United States (US) business advisory firm. Tyler, on the other hand, had been based in London as a lead investment banker for a large, European-owned bank. They each received a sizeable payout, so agreed to provide $500,000 in seed capital and provide their services to YML, at no charge for a period of 12 months, while the business was being established.
\nBased on advice from Kathy’s Chartered Accountant, the company was registered with each owner holding 100,000 shares (at a cost of $1 each) and the balance of their seed capital to be treated as an interest-free loan for 12 months. Kathy, Sharron and Tyler were each appointed as directors of YML. The Chartered Accountant recommended that they each sign a shareholder\u2019s agreement to protect their interests and establish expectations around making business decisions.
\nCompany history
\nBy the end of November 2009, the team had accomplished the following:
\n\u2022 Rented 2,000 square metres of warehouse space in Sydney, and fitted out the warehouse space and an office area.
\n\u2022 Established supply agreements with several key surf goods manufacturers and procured goods from them.
\n\u2022 Built a website and integrated it into the supply chain and financial systems.
\n\u2022 Engaged an external marketing organisation to help develop an online presence and began online promotion of the business.
\nYawMkt.com.au went live for orders on 30 November 2009, which was a ‘Cyber Monday’ (an annual retail sales event in which businesses encourage customers to make online purchases). It was Sharron’s idea to launch the website on this date.
\nThe initial launch experienced both success and failure \u2013 success came through the number of people visiting the website and the order conversion rate of over 3%. However, due to the high volume of traffic, the website was down for 30 minutes and experienced slow response times. This caused integration issues with the inventory system, allowing online sales for more units than were in stock for several popular items.
\nOver the following months, these problems were resolved, and YML settled into a more regular business rhythm. Between 2010 and 2012, YML’s brand recognition grew slowly but steadily. However, YML continued to trade at a loss, resulting in the owners increasing the level of their investments to meet operational cash flow requirements.<\/p>\n
Customer order and fulfilment process
\nThe following is an outline of YML\u2019s online customer order and fulfilment process after its dropshipping program was introduced.
\n1. Consumer visits the YML website, selects products, places order, and makes payment to YML via credit card or one of the approved ‘buy now, pay later’ vendors that partner with YML.
\n2. Order information is passed to YML’s logistics system, LogiSys.
\n3. For each line item on the order, LogiSys determines if goods are to be supplied directly by YML or via a dropshipping supplier.
\na. If YML supplies the ordered items:
\ni. Details are passed to order fulfilment.
\nii. Picking is slip printed.
\niii. Goods are picked.
\niv. Transport is booked and items are collected by transport company.
\nv. Tracking information is emailed to customer.
\nvi. Goods are delivered.
\nb. If a dropshipping supplier supplies the ordered items:
\ni. Email is sent to supplier advising they have an order to fill.
\nii. Where a supplier has elected to integrate their systems with YML via an application programming interface (API), order details are passed electronically to supplier. Where no link exists, the supplier logs into the YML portal and downloads details of open orders, including the customer details.
\niii. Supplier picks items, arranges shipping, and ships items to customer.
\niv. Supplier updates order tracking details into LogiSys, either electronically or manually.
\n4. Customer is provided with the order terms, which allow customers to return goods within seven days for a full refund, provided goods are returned in as shipped condition.
\nDropshipping terms and conditions
\nThe following is an outline of the key terms and conditions for dropshipping suppliers:
\n\u2022 Suppliers provide details of products to list on YML’s website, including images and sale prices, but YML must approve listings prior to products being made available for sale.
\n\u2022 Suppliers must ship orders within 48 hours of the customer placing the order, and suppliers are responsible for all freight and shipping costs.
\n\u2022 All shipments must be sent in YML branded bags\/boxes, which YML provides to suppliers at no cost, ordered via the YML portal. No additional marketing or promotional materials can be included with the order.
\n\u2022 Suppliers must provide details of available inventory levels for all items to YML on a weekly basis or more frequently if possible.
\n\u2022 Suppliers can participate in promotional activities on the YML website, such as price discounting or other campaigns.
\n\u2022 As per YML’s accounts payable policy, YML pays all suppliers the order value less 15% commission by the 20th of the month following purchase. Supplier credit terms are ‘1.75\/15, net 30′, which means that YML can pay the account within 15 days of invoice issue date to receive a 1.75% discount.
\n\u2022 YML uses a mystery shopping function to ensure supplier compliance with order fulfillment requirements.
\nPart 1: (400 words)
\n1. Identify 5 weaknesses of the Customer order and 5 weaknesses fulfilment process and Dropshipping terms conditions
\n2. Provide steps to eliminate each of those weakness.
\n3. Explain the revenue recognition as per IFRIC15 from Customer orders sales and Dropshipping separately and provide how to record journal entries .
\nFinancial information
\nYML has a 30 June year end, and the following financial information has been included for reference:
\n\u2022 Table 1: Extracts of the income statements for the years ended 30 June 2021, 2022 and 2023
\n\u2022 Table 2: Extracts of the balance sheets as at 30 June 2021, 2022 and 2023
\n\u2022 Table 3: Selected ratios as at 30 June 2021, 2022 and 2023
\n\u2022 Table 4: Yaw Mkt Limited dashboard as at 30 June 2021, 2022 and 2023<\/p>\n
Table 1
\nExtracts of the income statements for the years ended 30 June 2021, 2022 and 2023
\nYaw Mkt Pty Limited
\nIncome statement for year ended 30 June (Extracts) 2023
\n$000 2022
\n$000 2021
\n$000
\nDirect sales 42,610 39,874 37,692
\nMarket place commission 358 0 0
\nTotal sales revenue 42,968 39,874 37,692
\nLess: Cost of goods sold (23,418) (21,931) (20,731)
\nGross profit 19,550 17,943 16,961
\nGross margin 45.5% 45.0% 45.0%
\nPlus: Other income 96 71 54<\/p>\n
Less: Expenses
\nDistribution expenses (including warehouse) 6,200 5,981 5,465
\nMerchant fees 623 698 754
\nMarketing 6,230 5,303 4,900
\nEmployee benefits 4,082 3,589 3,204
\nDepreciation and amortisation 322 259 188
\nAmortisation of intangibles 172 157 128
\nFinancing costs 111 88 94
\nOther expenses 1,289 1,176 1,037
\nTotal expenses 19,029 17,251 15,769<\/p>\n
Net profit before tax 617 763 1,246
\nLess: Income tax (152) (195) (334)
\nNet profit\/(loss) after income tax 465 568 911
\nOther income information 2023
\n$000 2022
\n$000 2021
\n$000
\nEarnings before interest, tax, depreciation and amortisation (EBITDA)
\n1,221
\n1,266
\n1,655
\nDividends paid (256) (312) (501)<\/p>\n
Table 2
\nExtracts of the balance sheets as at 30 June 2021, 2022 and 2023
\nYaw Mkt Pty Limited
\nBalance sheet as at 30 June (extracts) 2023
\n$000 2022
\n$000 2021
\n$000
\nCURRENT ASSETS
\nCash and cash equivalents 4,923 3,805 4,669
\nTrade and other receivables 3,078 1,455 748
\nInventories 1,921 3,097 3,168
\nOther current assets 84 28 54
\nTOTAL CURRENT ASSETS 10,006 8,385 8,639
\nNON-CURRENT ASSETS
\nRight-of-use asset 42 169 296
\nProperty, plant and equipment 870 780 652
\nIntangible assets (including software and website) 1,669 858 784
\nTOTAL NON-CURRENT ASSETS 2,581 1,807 1,732
\nTOTAL ASSETS 12,587 10,192 10,371<\/p>\n
CURRENT LIABILITIES
\nTrade and other payables 4,586 4,086 4,146
\nLease liabilities 37 111 111
\nIncome tax payable 38 49 84
\nEmployee benefits 584 638 621
\nDeferred revenue 589 796 731
\nProvisions \u2013 refunds and replacements 387 359 339
\nProvisions \u2013 dividends 136 175 265
\nShareholder loans 150 150 150
\nInterest-bearing debt 100 100 100
\nTOTAL CURRENT LIABILITIES 6,607 6,464 6,547
\nNON-CURRENT LIABILITIES
\nEmployee benefits 136 185 175
\nLease liabilities 0 37 148
\nShareholder loans 400 750 900
\nInterest-bearing debt 400 700 800
\nTOTAL NON-CURRENT LIABILITIES 936 1,672 2,023
\nTOTAL LIABILITIES 7,543 8,136 8,570<\/p>\n
NET ASSETS 5,044 2,057 1,801<\/p>\n
Table 3
\nSelected ratios as at 30 June 2021, 2022, and 2023
\nIndicators 2023 2022 2021 Industry benchmark
\nGross profit margin 45.5% 45.0% 45.0% 36.0%
\nReturn on assets (EBIT \u00f7 total assets) 5.8% 8.3% 12.9% 10.0%
\nInterest coverage ratio (earnings basis) (EBIT \u00f7 interest) 6.58 9.69 14.32 –
\nInventory days (using year end balances) 30 days 52 days 56 days 120 days
\nCurrent ratio (total current assets \u00f7 total current liabilities) 1.51 1.30 1.32 1.37
\nDebt-equity ratio (total liabilities \u00f7 total equity) 1.50 3.96 4.76 –
\nDebtor days (using year end balances) 26 days 13 days 7 days 30 days
\nCreditor days (using year end balances) 71 days 68 days 73 days 60 days
\nAsset turnover (total sales revenue \u00f7 average total assets) 3.77 3.88 3.74 2.10
\nTable 4
\nYaw Mkt Pty Limited dashboard as at 30 June 2021, 2022, and 2023
\nPart 2. (600 words)
\n4. Write a commentary to be included with the dashboard. Your commentary should summarise key takeaways for the Board from the information included on your dashboard, the financial statements and ratios.
\n5. Outline the key recommendations you would make to the Board, based on your analysis. (How to improve\/overcome issues identified in the above analysis)<\/p>\n
___________________________________-
\nPart 1: Identifying Weaknesses and Addressing Them<\/p>\n
Weaknesses in the Customer Order and Fulfilment Process:<\/p>\n
Integration Issues: One of the major weaknesses in the customer order process was the initial integration issues with the inventory system, leading to overselling of products. To address this, YML should invest in robust inventory management software to ensure real-time stock tracking and prevent overselling.<\/p>\n
Limited Returns Policy: YML’s return policy allows customers to return goods within seven days but only in “as shipped” condition. This policy may deter potential customers. To improve customer satisfaction, YML could consider extending the return window and allowing for slightly used items to be returned within a reasonable period.<\/p>\n
Dependence on Dropshipping: While dropshipping can be cost-effective, it makes YML reliant on external suppliers’ efficiency. To mitigate this weakness, YML should diversify its supplier base and ensure all suppliers meet strict performance standards, including timely order fulfillment.<\/p>\n
Communication with Suppliers: YML’s current communication with dropshipping suppliers relies on manual processes in some cases. Implementing an automated API system for all suppliers can enhance efficiency and reduce errors in order processing.<\/p>\n
Marketing Expenses: The marketing expenses have been steadily increasing. YML should conduct a thorough ROI analysis on marketing efforts to ensure that the return on investment justifies the expenses.<\/p>\n
Steps to Eliminate These Weaknesses:<\/p>\n
Inventory Management Software: Invest in an advanced inventory management system that integrates seamlessly with the website to provide real-time stock updates and prevent overselling.<\/p>\n
Enhanced Returns Policy: Extend the return window to 14 or 30 days and allow for returns of gently used items. This change can improve customer satisfaction and loyalty.<\/p>\n
Supplier Diversification: Identify and onboard additional reliable dropshipping suppliers to reduce dependency on a single source. Maintain stringent supplier performance standards.<\/p>\n
Automated Communication: Implement automated communication systems (APIs) for all dropshipping suppliers to streamline order processing and minimize errors.<\/p>\n
Marketing ROI Analysis: Conduct a comprehensive analysis of marketing campaigns to optimize spending. Focus on strategies that provide a higher return on investment.<\/p>\n
Revenue Recognition as per IFRIC 15:<\/p>\n
Under IFRIC 15, revenue should be recognized when control of the goods or services has transferred to the customer. For YML, this means recognizing revenue at different points in the process:<\/p>\n
Customer Orders: Revenue should be recognized when the customer places an order, as this is when control transfers to YML. Journal entry: Debit Accounts Receivable, Credit Sales Revenue.<\/p>\n
Dropshipping Sales: Revenue for dropshipped items should be recognized when the supplier ships the products to the customer, as control transfers at this point. Journal entry: Debit Accounts Receivable, Credit Sales Revenue.<\/p>\n
Part 2: Commentary and Recommendations<\/p>\n
Dashboard Commentary:<\/p>\n
The dashboard for Yaw Mkt Pty Limited reveals several key insights for the Board. Firstly, YML’s gross profit margin has been consistently above industry benchmarks, indicating healthy profitability. However, the return on assets has been declining over the years, suggesting the need for improved asset utilization.<\/p>\n
While YML’s current ratio and debt-equity ratio appear stable, the inventory turnover rate needs attention, as it lags behind industry norms. Additionally, debtor days and creditor days are within acceptable limits, but efforts should be made to expedite collections and extend payment terms where possible.<\/p>\n
The income statement reflects a decline in net profit before tax, attributed to increasing expenses, particularly in marketing and distribution. The shift towards marketplace commission income in 2023 indicates a new revenue stream that should be monitored for growth potential.<\/p>\n
Recommendations:<\/p>\n
Optimize Asset Utilization: To improve the return on assets, YML should assess its asset portfolio and consider divesting underperforming assets or enhancing their utilization.<\/p>\n
Inventory Management: Address the high inventory days by implementing efficient inventory management practices. This includes reducing excess stock and optimizing procurement.<\/p>\n
Working Capital Management: Focus on improving cash flow by negotiating favorable payment terms with suppliers and accelerating the collection of receivables. This can positively impact cash and cash equivalents.<\/p>\n
Marketing Efficiency: Conduct a detailed analysis of marketing expenses to identify cost-effective strategies. Allocate resources to campaigns that yield the highest return on investment.<\/p>\n
Diversify Revenue Streams: Continue exploring revenue streams like marketplace commissions while maintaining core business focus. Monitor the growth potential and profitability of new income sources.<\/p>\n
Debt Management: Carefully manage interest-bearing debt to reduce financing costs and improve interest coverage ratios.<\/p>\n
Regular Performance Monitoring: Implement regular performance reviews and monitoring of key financial ratios to ensure YML’s financial health remains stable and adaptable to market changes.<\/p>\n
In conclusion, Yaw Mkt Pty Limited has shown solid profitability but faces challenges in asset utilization, inventory management, and expense control. Implementing the recommended strategies can help the company address these weaknesses and position itself for sustainable growth in the future.<\/p>\n","protected":false},"excerpt":{"rendered":"
Case study Yaw Mkt Pty Limited (YML) In late 2008, Yaw Mkt Pty Limited (YML) was incorporated by a team of three entrepreneurs \u2013 Kathy Lopez, Sharron Ho and Tyler Carroll. They used their combined skillsets to establish the company website, YawMkt.com.au, which supplies surfing-related products, including clothing, surfboards, surf skis and accessories. YML was […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15,20,3,1031,1032,110],"tags":[1041,1034,1043,1033,1040,1038,1039,952,295,1036,1042,1035,1044,1037,268],"class_list":["post-2804","post","type-post","status-publish","format-standard","hentry","category-ace-my-homework","category-ace-myhomework","category-homework-ace-tutors","category-i-need-help-with-my-homework","category-in-a-page-paper","category-write-an-essay","tag-custom-essay","tag-dissertation-ideas","tag-dissertation-topic","tag-essay-topics","tag-free-essays","tag-help-in-assignment","tag-help-with-class","tag-i-need-help","tag-page-paper","tag-research-paper-samples","tag-term-paper","tag-thesis-examples","tag-thesis-writers","tag-write","tag-write-a-paper"],"_links":{"self":[{"href":"https:\/\/www.colapapers.com\/essays\/wp-json\/wp\/v2\/posts\/2804","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.colapapers.com\/essays\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.colapapers.com\/essays\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.colapapers.com\/essays\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.colapapers.com\/essays\/wp-json\/wp\/v2\/comments?post=2804"}],"version-history":[{"count":0,"href":"https:\/\/www.colapapers.com\/essays\/wp-json\/wp\/v2\/posts\/2804\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.colapapers.com\/essays\/wp-json\/wp\/v2\/media?parent=2804"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.colapapers.com\/essays\/wp-json\/wp\/v2\/categories?post=2804"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.colapapers.com\/essays\/wp-json\/wp\/v2\/tags?post=2804"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}