Download - Management Accounitng
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Management Accounting Assignment
Submitted To,
Dr. Monica Singhania
Faculty Of Management Studies, Delhi
Submitted By,
Section :A
Group 1:
Aakash Meena ( Roll No. 101)
Kalpesh Bonde ( Roll No. 126)
Sidharth Sharma ( Roll No. 151)
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Synopsys
Company Overview/Profile:
Company Selected K. V. PACKAGING
Company Address
S.No. 1997, W.M.D.C., Ambethan Road, Chakan, Near Gandharv
Hotel, Pune - 410502
Factory Address
Gat No. 624/4 Shop No.01 , Opposire ASAL COMPANY ,Chakan
Alandi Road, kurali .Tal Khed - 410501
Establishment Year 2013
Firm Type Industries
Business Type Industry / Manufacturing
Products & Services
Manufacturing all type of corrugated boxes, boards, sheets &
polythene bags in mono layer .
Managing Director Mr. Piyush Deshmukh, and Mr. Vaibhav Patil
Issues faced by company at present
1. It is an emerging company and it has tough competition from pre-existing well setup
companies.
2. Accounts receivables are not received in given stipulated time.
3. Optimization of operation activities like scheduling, transportation etc.
Final deliverables:
The major problem faced by company is about transport. Lacking the knowledge about
optimum quantities to be sent to customers and route selection, they spent lo of money on
transportation. In our strategic decision suggestion we will build a plan to tackle issues in
short term and long term. We will also help them to develop optimized transportation model.
In the end, we will try to come up with a concrete strategy the company should follow to
cope up with the issues
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Case Study
Company Selected: K V Packaging
Managing Director: Mr. Piyush Deshmukh.
Mr. Vaibhav Patil.
Company Address:
S.No. 1997, W.M.D.C., Ambethan Road, Chakan, Near Gandharv Hotel, Pune 410502
About Company:
KV Packaging manufactures and supplies corrugated boxes, cartons and related packing
materials.
Directors Piyush Deshmukh (B.E. Mechanical Engg. Pune university , Post
Graduate Diploma course In Piping Design Engg.) and Vaibhav Patil (Diploma In Civil Eng.
10 Years Experience In Construction Field) are sole controller of the business and are having
well versed experience in Finance, Marketing and Purchase. General Manager Mr. Pratik
Horshil is handling the responsibility of Production Dept. and other Technical Matters.
The company mainly manufactures corrugated boxes of 3 types:
3 Ply corrugated Box
5 Ply corrugated Box
7 Ply corrugated Box
KV packaging has capacity of producing boxes of weigh 3000 kg per day. The company
works in only one shift of 8 hrs. On an average machines take approximately 20 minutes to
completely come into working condition [Machines take 20 minutes for heating up]. Once
this period is over, they produced boxes continuously for 8 Hrs. In this company, the lunch
hours and tea time consist of 40 minutes. So, the total production takes place for 7 hrs.
Hence,
Production Rate= (3000/7) = 428.57 kg/hr
The company produces corrugates boxes of 428.57 kg every hour.
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These boxes are transferred to different locations like Aurangabad, Jalgaon, Nasik,
Ahmednagar, Baramati etc. From Nasik and Ahmednagar, grapes are packed in these boxes
for export purpose while from Jalgaon, bananas are packed. Automobile parts are exported
from Aurangabad through these boxes. These boxes are not sold in unit quantities but they
are sold as per their weight. So, costumers buy these products in Kg.
Swot Analysis
STRENGTHS
Low cost manufacturing
Latest Equipment
Excellent Service through
Convenient process
Growing Network from agricultural
products to automobile
products
WEAKNESSES
New Entrant
Logistics and Infrastructure
OPPORTUNITES
CAGR of around 15% till 2017
Continuous Expansion ofE-Commerce
Industry
Strengthning of Manufacturing
Sector
THREATS
Hike in raw material price
upto 30%
No regualtion in regard to enter
market
Excess Suppply & Intense
competition
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Porter Five Forces Analysis
This is done for better understanding of corrugated cardboard industry:
Threat of New Entry:
Overall, there are around 12,000 corrugate cardboard producers within the country. Since, the
entry barriers are very low therefore more and more players are entering into this market.
There is not much requirement of technology and therefore start-up cost is also very low.
Also, it does not take much time to build expertise, thus its very hard to differentiate among
product except price. These factors lead to the high threat of entry.
Threat of Substitute Product:
This industry is very flexible and always needs to diversify in meeting the customer
requirements. Furthermore, as the product is not so complicated; competition is very high, so
the credibility and relationship needs to be very high in the business. Thus the threat of
substitutes is also very high.
Bargaining power of the Buyers:
Since, supply is abundant without being much differentiation; buyers do not have much
commitment to suppliers. The suppliers depend heavily on their buyers. These indicates that
its very easy to change suppliers & thus price is always first point of consideration. This
indicates that the bargaining power of buyer is high.
Bargaining power of the Suppliers:
There are lots of options available to the suppliers. Cost of manufacturing increasing, due to
hike in price of raw materials. Manufacturers need to maintain good commitment to the
suppliers for continuous supply of raw materials at bargained price. This indicates that
bargaining power of suppliers are high moderate.
Rivalry between competitors:
Since, market is highly segregated, no. of small & medium players are very high. This lead to
intense competition in the industry leads to low prices, high quality & improved services to
the customers.
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Case Details The growing Indian economy and a flourishing organized retail have raised the expectations
that consumption of corrugated packaging will begin to expand again as the number and
volume of goods packaged in corrugated increases. Many FMCG, super-shops etc. are
demanding corrugated boxes of international standards and the pattern of buying the
packaging is changing
Prices of corrugated sheet and converted boxes have remained low due to the over-capacity,
manual operations and low productivity. Besides, transport constraints and high freight costs
have meant that small to medium sized corrugated box plants are located near the customers.
These plants are highly labor-intensive. In this case, the present scenario is discussed. Here,
we have tried to solve the problems faced by KV packaging. The major problem faced by this
industry is,
Optimum of Transportation Model
Optimum of Transportation Model
The main manufacturing plant of KV Packaging is situated in Pune, Maharashtra. Their
business is mainly spread in Maharashtra only. The major districts where they export their
boxes are
1) Aurangabad 2)Jalgaon 3) Nasik
4) Ahmednagar 5) Baramati
They have warehouses at Nasik, Jalgaon and Ahmednagar from where boxes are shifted to
farther locations. From Jalgaon, boxes are shifted to Yawal, Raver, Bhusaval and Chalisgaon.
From Nasik, boxes are shifted to Dindori, Nifad and Chandwar while from Ahmednagar
boxes are shifted to Sinnar and Igatpuri.
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KV Packagings Transportation Network
The aggregated weekly demand for the boxes at different location is as follows,
Districts Destinations Demand (Kg)
Aggre. Demand
(Kg)
Ahmednagar Sinnar 1000
2000 Igatpuri 1000
Nasik Dindori 5000
7000 Nifad 1000 Chandwad 1000
Jalgaon
Yawal 1000
6000 Raver 3000 Bhusaval 1000 Chalisgaon 1000
Aurangabad Aurangabd 2000 2000 Baramati Baramati 1000 1000
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Also, different routes are
Routes Km
From To
A Pune Aurangabad 239
B Pune Jalgaon 449
C Pune Nasik 211
D Pune Ahmednagar 127
E Pune Baramati 110
Different cost associated with transportation through different routes are as follows
Route Weight Freight
Charges
Miscell.
charges Loading/Unloading
Total
(Rs)
No. of
Trucks
Trans.
Cost
Rs/ kg
A 2000 4085 1634 500 6219 1 3.1095
B 6000 7235 23152 1800 32187 3 5.3645
C 7000 7235 22000 2000 31235 4 4.462143
D 2000 2406 962 500 3868 1 1.934
E 1000 2150 2000 300 4450 1 4.45
Followings are the cost associated with transferring goods from warehouse to respective
destinations.
From To Km Weight Freight
Charges
Per unit
charge
Jalgaon Yawal 50 1000 1000 1
Jalgaon Raver 62 3000 4000 1.333333
Jalgaon Bhusaval 26 1000 700 0.7
Jalgaon Chalisgaon 50 1000 1000 1
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From To Km Weight Freight
Charges
Per unit
charge
Nasik Dindori 50 5000 6000 1.2
Nasik Nifad 40 1000 1000 1
Nasik Chandwar 60 1000 1000 1
From To Km Weight Freight
Charges
Per unit
charge
Ahmednagar Sinnar 60 1000 1200 1.2
Ahmednagar Igatpuri 45 1000 1000 1
From this data, Optimized transportation model is developed.
Abreviation Used:
P: Plant
W: Warehouse W=1, 2, 3, 4,5
C: Customers/ Destination..C=1, 2, 3, 4
P1W1= Plant to warehouse 1
W2C4= Warehouse 2 to Customer 4
Objective is:
Minimize 24142.133132.1
423212233.1125145.441934.131462.4213645.5111095.3
CWCWCWCWCWCWCWCWWP
WPWPWPWPz
Subjected to constrains:
Supply Constrain
P1W1+P1W2+P1W3+P1W4+P1W5 = 18000
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Demand Constrain
P1W1 = 2000
P1W5 = 1000
W2C1+W2C2+W2C3+W2C4 6000
W3C1+W3C2+W3C3 7000
W4C1+W4C2 2000
Constrains at warehouse
P1W2= W2C1+W2C2+W2C3+W2C4
P1W3 = W3C1+W3C2+W3C3
P1W4 = W4C1+W4C2
Solutions:
This simple linear programming model has been solved by excel solver. The result obtained
are as follows:
The optimum cost of transportation is Rs. 92,958 weekly.
Sensitivity Analysis:
The following table gives the optimum quantity that we should transfer from plant to
different customers and warehouses. From the sensitivity analysis, we can find out the
allowable increase and decrease in objective coefficient which will not change the optimum
solution.. With the help of this table we can find out when to change the quantities that can be
transferred to different customer and warehouse if prices of transportation changes. E.g. for
P1W1 allowable increase is 3.255 which means even if the transportation cost has been
increased up to 6.3645 Rs/kg, the optimum solution will not change while is allowable
decrease is infinite which means even if transportation cost if 0 Rs/kg, we should transfer
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2000 units to W1. If change in objective coefficient 3.1095beyond this limit, the solution will
change.
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Teaching Notes
The case can be used in the following courses:
1.) Post graduate program in Operation Management: The concept of managing logistics & transportation in such low cost would be an appropriate case to study.
2.) Post graduate program in Management Accounting: The case would introduce sensitivity analysis of the report and its interpretation.
It can be used to show the growth of SME in this industry with the growth of manufacturing
sector in developing India.
Learning outcomes:
Optimization of Transportation Model
Sensitivity analysis of Linear Programming Excel Solver Report and interpretation
The importance of logistics within an organisation.
This will illuminate the importance of low transportation cost in evolving of an
organisation.
Methods of sustaining in industry in such a pressuring environment.
Help in analysing the results with various benchmark of the industry, to ensure
continuous improvement on timely basis.
The importance of strategy in development of organisation and how it able to keep
firm sustainable in long run.
The importance of quantitative data measures as a key measure for organisation
performance.
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Introduction:
First, brief introduction is needed to be given to students about the corrugated box industry in
India & World. They should be made aware of challenges & problems lying ahead in way of
the growth in this sector. They should also be made aware of various technical aspect of
logistic management. The best practices adopted in the industry need to be discussed. This is
a sector which involves a lot of innovation. So such innovations & expectations should be
discussed with students.
How the implementation of proper checks on changes of key performance assets helps to
monitor organizations progress need to be discussed. These all will help in better
understanding of the problem
Other than above different scenario from the industry can be discussed in terms of pure
logistic management to develop the understanding of student in field of operation
management.
Teaching plan/process:
Method 1
The case should have been given to the students before class. Clear instruction would be
given to read case, prepare summary and transportation diagram. It should also be told that
there would be a full flashed discussion in next class. Some text must be referred to the
students for purpose of reading, in case of any doubt such text needs to be referred for better
understanding.
The case must be discussed in two sessions with a break in following manner:
Session 1
Particulars Duration
Introduction (Industry & competition) 10 minutes
Challenges faced by the organization in current scenario
10 minutes
Design Of Transportation Model and solving 30 minutes
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Session 2
Particular Duration
Forming group & discuss case within group 15 minutes
Case Discussion/ Sensitivity Analysis 25 minutes
conclusion 5 minutes
Method 2
The students can be invited for presentation on the case in groups. Such presentation can be
thoroughly discussed in the class.
Session 1
Particulars Duration
Presentations by different groups 35 Minutes
Discussion conclusion 10 minutes
Question for discussion:
How to develop transportation model?
What constraints to take into consideration?
What strategy can be adopted by the organisation to increase companys profitability?
What are the various benchmarks set up by the different competitors & analyse the same?
What do you think about the companys business model & comment on sustainability?
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References
Company Profile sent by Mr. Piyush Deshmukh Interview with Mr. Piyush Deshmukh
Permission Letter