Duetto: Industry Transformation

with Big Data

It was June 2010 when Marco Benvenuti and Patrick Bosworth decided to
leave the Wynn Resorts in Las Vegas to create their own business, Duetto
Consulting. The two founders had a dream of revolutionizing hospitality
revenue management. With its product portfolio largely in place, Duetto
was seeking a series C round of financing.
While working on four hours of sleep a night to run the business while
preparing to raise a further round of financing, the Duetto founders were
also evaluating their long term options. Should they stay true to the original
vision of helping lodging and hospitality operators by offering a superior
revenue strategy solution?
This would entail focusing on organic growth and independent operations,
leading perhaps to an IPO sometime in the future. Or should they seek an
early exit selling to an established revenue management vendor or a major
OTA with deep pockets?

EuroFood Case Analysis:

History:
EuroFood was created by French restaurateur, Mr Vigneau which
specializes in the importing and distributing of food products from
Europe to Hong Kong.EuroFood has faced a problem with
inventory costs. The Olivier Company decided to buy EuroFood on
the condition that inventory levels has to be reduced from its
current level of 11 million Hong Kong Dollars to at least 4 million
Hong Kong Dollars (assumption).In order to achieve the inventory
reduction a plan of action has to proposed which details the
solution to the current high levels of inventory. All the products
brought to Hong Kong are shipped either by plane or through
cargo boats (channels of distribution). The exclusively perishable

products shipped through airplanes have no inventory records to

be kept. The only inventory of Euro Foods is the products shipped
via boats. The products shipped through boats are divided mainly
into two types:
1. Complete Container: Contains products shipped from the
same supplier. Complete container takes about 20 days to
ship from Europe to Hong Kong and costs 0.5 Hong Kong
Dollars per kilogram
2. Consolidated container: Contains products shipped from a
group of suppliers using the same container as a rented
facility. This shipping takes about 30 days to reach the
customer and costs about 3 Hong Kong Dollars per kilogram.
Main Problem:
The current level of inventory of Euro Foods is worth $11
million. This is too much compared to the Olivier Company
which has the same volume of business as Euro Foods with a
corresponding inventory level of only $4 million.
The order quantity is high due to wrong forecasting which
leads to high inventory costs
Some products have higher inventory costs than its annual
sales( Eg: The product Carton Peach has an inventory cost of
$437,113 and an annual sale of $ 253,248 which led to profits
of only $68,377)
Due to higher inventory levels of the products the annual profit
from the respective products are significantly lower compared
to products which has lower inventory level.
There are too many product categories (around 200 different
products) which has higher inventory levels and lower annual
sales(Eg: The product Crozes Hermitage 1984 has $158 annual
sales but the inventory level is $2045 and total profit is only
$47)
Solutions:

 Cut down the products which has low profit and low
annual sales but high inventory costs(Eg:Crozes
Hermitage 1984
Concentrate on top sale products like for example UHT
Whipping cream 1 Liter, Portion Butter Unsalted etc.
whose annual sales are high compared to inventory
costs
Make the forecasting of all products more accurate by
using better forecasting techniques which can reduce
the inventory level and ordering quantity more accurate
Top sale products like Whipping cream and Butter has
to ordered more frequently based on the accurate
forecast (using combined container) rather than storing
it because these products can go bad easily.
Combine the products from the same supplier to reduce
the ordering quantity(Eg: Products from Supplier
Besnier can be combined into the same container)
Negotiate with current suppliers to reduce the ordering
cost
Seek third party distributors to get a lower shipping
cost if negotiation with current suppliers does not work
out.
Assumption:
The holding costs and inventory costs affect the
profit of the products
Time Frame in which the inventory reduction has
to be achieved is irrelevant(Assumption)