You will make at least six charts, including at least one geographic map, at least one bar, at least one table, and at least one line chart. Describe how your data set(s) will provide enoug

Expanding Within the Value Chain – Group Project, Part 1

Group 5 – Alfredo Mojena Hernandez, Allison Medina, Camila Cuesta, Jose-Daniel Hernandez, Lance Aschliman

We have decided to explore the topic of value chain expansion and how the provided

data set might indicate whether it would be worthwhile for the given wholesale company to

expand in this way. By “value chain expansion,” we mean expanding operations vertically within

the product chain of exchange to manufacturing and/or retail in addition to current wholesale

operations.1 In our view, this would be worthwhile for C-level management to explore given that

value chain expansions can provide a number of benefits to a company already engaged at one

level of the system. For example, if a wholesaler were to expand and also engage in

manufacturing on the supply side, not only would they be able to benefit from the margins

earned at the supply level, they would also be able to enhance their own control over the

logistics between supply and wholesale. Of course, such expansions do not come without their

drawbacks, so it will be important to use the data provided to determine whether such

expansions will make sense for the company and for what products and at what locations.

Value chain expansion is becoming an increasingly utilized form of growth in the

corporate world. There are a myriad of examples of companies who, for example, engage in

both manufacturing and in wholesale distribution and enjoy the benefits described above.

Consider Proctor and Gamble Company: P&G engages in the manufacturing and wholesale

distribution of a number of products in a number of different segments. While they do outsource

some operations when beneficial to do so, they also produce and wholesale health and

wellness products (prescription medications, digestive aids, toothbrushes, etc.), house and

home products (cleaning products, detergents, paper towels, etc.), personal and beauty related

products (fragrances, deodorants, cosmetics, etc.), and even family and pet care related

products.2 In the alcoholic beverage industry, while it is still not legal in some jurisdictions due to

2 See https://www.britannica.com/topic/Procter-and-Gamble-Company for a more comprehensive list.

1 See Michael Porter’s Competitive Advantage: Creating and Sustaining Superior Performance for the seminal description of value chains.

state-mandated 3-tier legal systems dating back to Prohibition, it is also increasingly common

for manufacturers to engage in value chain expansion and to self-distribute and wholesale their

own products in order to “cut out the middle-man” and garner benefits related to higher margins

and greater logistics control.3 We aim to examine the data set and determine whether such

vertical value chain integrations would be beneficial for the given wholesaler.

Considering the comprehensive nature of the dataset and the strategic goal of exploring

value chain expansion, a multifaceted approach is essential. The data presents an opportunity

to pinpoint specific segments where vertical integration could not only enhance profit margins

but also offer competitive advantages through improved logistics and quality control. The

dataset provided contains comprehensive transactional and demographic information,

structured across three distinct sheets named 'Orders', 'Returns', and 'People'.

The 'Orders' sheet includes data pertaining to 9,994 sale transactions performed over

the course of 4 years (2014-2018) broken into variables referencing sales, profits, product

categories, and customer segments, along with geographic information like region and city. The

sales data across different segments and regions, combined with profit margins, will illuminate

areas where high sales volumes aren't translating into proportional profits. This discrepancy

could be indicative of inefficiencies or high operational costs that vertical integration might

alleviate. For instance, if certain product categories show robust sales but lower profits, this

could signal an opportunity for the company to consider manufacturing these products in-house.

By doing so, the company could capture additional value that is currently lost to suppliers or due

to logistics inefficiencies.

Moreover, the return rates data can be a critical indicator of product categories that may

be suffering from quality issues. By analyzing which products are returned most frequently and

3 See https://brewerslaw.com/self-distribution-of-beer-in-florida-2019/ for a discussion of where Florida law currently stands regarding beer self-distribution.

pairing this information with profit margins, we can identify candidates for bringing production

in-house or for closer partnerships with manufacturers to enhance quality control.

We also need to consider the ‘People’ data sheet, which could provide insights into

customer demographics and their buying patterns. Understanding the profile of customers who

are buying the most and the least profitable products could guide targeted marketing and sales

strategies post-expansion.

References:

Brewer’s Law (2019). “‘Self-Distribution’ of Beer in Florida – 2019.” Accessed 3/31/2024. <https://brewerslaw.com/self-distribution-of-beer-in-florida-2019/>

Porter, Michael (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York, NY. Simon and Schuster.

Tikkanen, Amy (2024). “Proctor and Gamble Company.” Britannica Online. Accessed 3/31/2024. <https://www.britannica.com/topic/Procter-and-Gamble-Company>