Management Accounitng

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)

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

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.

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

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.

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.

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

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

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

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

2000 units to W1. If change in objective coefficient 3.1095beyond this limit, the solution will

change.

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.

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

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?

References

Company Profile sent by Mr. Piyush Deshmukh Interview with Mr. Piyush Deshmukh

Permission Letter