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The AMA Handbook of Due Diligence by Andrew J. Sherman, William M. Crilly

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Major Distribution Equipment and Acquisitions / Accounting - Forms 14-06 and 14-07 (Continued)
T
rend In Distribution Staffing And Expenses - Form 14-08
The upper tabulation, when completed, will indicate the trend in personnel associated with the physical dis-
tribution function. The lower tabulation will summarize the trend in distribution expenses.
Distribution Of Outbound
Transportation By Type Of Carrier - Form 14-09
Knowledge of the entity’s methods of outbound shipment is useful in determining where future cost savings may
be anticipated. If a significant portion of the shipments utilize high cost freight services a detailed analysis may
reveal that either the entity, or its customers, can achieve substantial savings by shifting to more cost-effective
forms of transportation.
In the event the entity does not routinely keep records of shipments by type of carrier and type of service, this
information can be obtained on a sampling basis.
WHAT TO LOOK FOR
Are a large percentage of outbound shipments utilizing the higher cost transportation services?
Are the entity’s selling prices based on FOB entity’s shipping dock?
To what extent does the entity negotiate with the carriers for reduced rates?
WHAT TO LOOK FOR
Has there been a significant variation in the trend in the number of personnel assigned to the
distribution function?
Has there been a significant variation in the distribution expenses, expressed as a percent of net
revenues? If so, what appear to be the primary reasons for the variation?
Does the distribution organization appear to be well balanced with respect to the ratio of admin-
istrative personnel to direct labor personnel?
WHAT TO LOOK FOR
Is the majority of the distribution equipment owned or leased?
Does the average age of the equipment suggest it is being replaced on a timely basis?
Does it appear that the equipment is being properly maintained?
Has there been a significant variation in the rate of acquisition of distribution equipment in the
last several years? If so, what has been the reason for the variation?
In a potential merger situation - are the entity’s accounting policies comparable to those of the
prospective acquiror?
DUE DILIGENCE HANDBOOK 14-03
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