Executive Summary

The Jacobs Company: Expansion and Development

Class

: K11MBA2

Team

: 07

Members : Nguyen Thanh Kim Nguyen

Nguyen Thu Phuong
Hoang Xuan Qui
Le Thi Hoai Trinh

Background Information
Jacobs Industries is a corporation of Pangea, headquarter in Calopia. Their only product
is an industrial chemical that can be mixed with air to form a foam that is: lightweight,
stable over a very wide range of temperatures, thermal insulator and acoustic insulator.
About 1.5 years into operations, Jacobs looked for new markets and found some
industries where Jacobs foam would be superior substitute for the insulating foam
currently used.
Jacobs target markets are:
-

Calopeia: Air conditioner retrofit kits the foam improve the efficiency of existing
air conditioners

Sorange: Hardwood floor laminates - better acoustic insulation for floor

-

Tyran: Premium home appliances - premium acoustic insulation on several of its

high-end appliances

Entworpe: Insulation products for commercial builders

Fardo: Premium home appliances and Private airplanes

After 2 years into operation, Jacobs began to sell products to all new markets.
However, the technology will be obsolete in the next 2 years by another technology
currently in development. Therefore, Jacobs need to manage the supply chain to
maximize the cash position in 2 years, before company swaps to new technology and new
product.
As Jacobs managing team, we:
check the plot demand in Head quarter from the day 640 to 730 from all regions,
then estimated the future demand of these 5 regions base on their history demand
-

calculate P&L for these 5 regions and decide whether to do business

adjust shipping method to meet the demand of each region.

Issue Statement
Increase cash position by 35% per year in the next 3 years by maintaining Calopeia
market and expanding Jacobs into 4 new markets: Sorange, Tyran, Entworpe, Fardo with
2 new factories in Sorange and Fardo; 4 new warehouses in each new market, leveraging
easy adaptation to market change and high quality product.

Recommendations
Over the next 3 years period, Jacobs Industries should focus on maintaining Calopeia
market and expanding into 4 new markets: Sorange, Tyran, Entworpe, Fardo with 2 new
factories in Sorange and Fardo; 4 new warehouses in each new market, leveraging easy
adaptation to market change and high quality product.
1.

Maintain Calopeia market with available one factory and one warehouse

2.

Build factories and warehouses in new markets: Sorange, Tyran, Entworpe and Fardo
a. Identify when and where to build new factories and warehouses
b. Calculate capacity for the factories

3.

Set order point, order quantity and priority level for each factory
a. Forecast demand for each market in next few days based on past data
b. Choose order point and order quantity for each market
c. Set high priority level for warehouses which locate the same region with the
factory

4.

Choose shipping method depend on inventory in the warehouses and order quantity

Summary and Conclusions

Jacobs Industries is a company to produce chemical foam that was widely used as an
insulator in type of products ranging from air conditioner to private airplanes. The
company made some unsuitable decisions at the first stage which led to the high cost of
building factory, high transport and fulfillment costs.
After inspecting the issue, we adjusted the strategy and managed Jacobs business grown
rapidly since 1200 days and yielding a profit of $22,886,595.
This profit is not as high as expected in P/L calculation, but the success with new strategy
in the last stage led the profit grown dramatically proved that we chose the right strategy.

When Jacobs ended business with old technology on day 1460, the inventories were
cleared; this saved much cost of producing.
Within the next 3 years, Jacobs will keep good relationship and continue providing new
product to existing customers and markets with the considerable innovations in
technology and delivery system. The company will also pay more attention to control the
cost of all activities. Beside current markets, Jacobs should do marketing to new potential
markets in Asia such as China, India to achieve the target of 40% profitability growth.

Attachment 1 - SWOT analysis

Strengths
-

Product is special and meet demands

of variable markets
Operations are easy to change to
adapt market demand
Economic of scale

Weaknesses
-

Opportunities
-

Demand of customer is high and

stable
Maintain the existing markets
Expand into new markets

High production cost

High shipping cost
High FGI holding cost

Threats
-

High competition from other

competitors
The customers orders fluctuate
seasonally

Attachment 3 - Value Analysis

When Jacobs began to sell to new markets, they had a factory and a warehouse and $5
million in capital funding and this was enough to get their business started.

The demands of markets were random and fluctuate. Starting a company needs to build
factories and warehouses. It spent $9.5 million to the fund while the cost to build and
expand factories was $9.1 million and the cost to build warehouse $400,000 million.

The Jacobs Company was selling in 5 markets with $1450/drum for all customers. So, the
revenue was $152,402,250.00 over 1460 days.

Description
Starting Cash
Cash Sources
Revenues
Interest
Cash Uses
add capacity
Production
FGI holding
Pipeline inventory
holding
outbound shipping
add warehouses
inbound shipping
Cash Balance

Total Costs: $129,515,655.60

Amount ($)
$5,000,000.00
.
$152,402,250.00
$2,409,554.37
.
-$4,300,000.00
-$107,068,000.00
-$579,751.17
-$93,904.43
-$17,074,000.00
-$400,000.00
-$13,817,500.00
$16,478,648.78

ROI = V/C =

$ 129,515,655.60

$ 152,402,250.00

= 1.18

The revenue generated from this investment is going to be larger than the investment
required.

Attachment 4 - Deployment Frame work

ACTION

Start
Date

Completed
Date

Maintain Calopeia market

Calculate average demand of
731
880
Calopeia market
Check inventory in Calopeia
731
1460
warehouse each day
Follow lost demand each day in each
731
1459
region
Set order point, order quantity
for Calopeia factory and choose
778
877
shipping method
Choose to serve regions of
Calopeia warehouses is
848
1460
Calopeia, Sorange, Tyran and
Entworpe
Set order point: 200 and order
quantity: 100 for Calopeia
factory to 4 warehouses
(Calopeia, Sorange, Tyran and
877
Entworpe) and choose mail is
shipping method for 4
warehouses
Build factories and warehouses in new market
Calculate average demand of new
731
736
markets
Build 4 warehouse in Sorange,
778
838
Tyran, Entworpe and Fardo
Build the factory in Fardo with capacity
780
870
is 16
Follow demand daily for new markets
731
1460
Follow lost demand each day for new
731
1460
markets
Build the factory in Sorange with
capacity is 50 when Sorange demand
880
970
increase quickly
Set order point, quantity, priority level and serve region

Person
Responsible
Commercial
Dept.
Commercial
Dept.
Commercial
Dept.

Cost
(USD)

Logistics
Dept.

MKT Dept.

Logistics
Dept.

MKT Dept.

Construction
Dept.
Construction
Dept.
MKT Dept.

400000
1300000

MKT Dept.

Construction
Dept.

3000000

1460

Commercial
& Logistics
Commercial

731

1460

Commercial

838

1460

MKT Dept.

870

1460

MKT Dept.

870

1069

Logistics
Dept

1069

1460

Logistics
Dept

970

Logistics
Dept

Check inventory in warehouses each day

731

1460

Follow demand daily for new markets

Follow lost demand each day in each
region
Choose serve region of Calopeia
warehouses is Calopeia,
Sorange, Tyran and Entworpe
Choose serve region of Fardo
warehouses is Fardo
Set order point: 2000 and order quantity:
1000 for Fardo factory to Fardo
warehouses and choose truck is shipping
method
Set order point: 400 and order quantity:
200 for Fardo factory to Fardo
warehouses and Choose truck is
shipping method
Set order point: 200 and order
quantity: 100 for Sorange
factory to 4 warehouses
(Calopeia, Sorange, Tyran and
Entworpe) and choose mail is
shipping method for 4
warehouses

731