Problem: A/S Dansk Minox is a company based in Copenhagen, which specializes in branded vacuum-packed meat and other food products. Through consumer survey, the company found that there was a large untapped market for a â€˜Complete mealâ€™ product which included sliced pork along with a vacuum-sealed bag of red cabbage salad. After long discussions among the marketing and finance departments, the complete meal pack was introduced at a price of $ 8.20 per pack of 1 kg. It sold only 30 tons as against the budgeted sales of 85 tons. The problem facing the company is that whether it has to stop further production of the â€˜complete mealâ€™ product or establish a new consumer price of $ 6.85 per pack, in order to boost sales. Considerations and Analysis: In order to decide the course of action we may look at the following facts and considerations. Consumer Price 8.20 6.85 Retailer Price 5.72 4.78 Variable Cost 3.49 3.41 Volume Sales (in kgs) 30000 85000 Advertising Costs 0.3 0.3 Impact on Profit 41,400 90,950 As we can see, impact on profit is higher when 85000 kgs of complete meal is sold at $6.85/kg, rather than selling 30000 kgs at $ 8.20/kg. Now, another point to note is if production expenses are to be revised to $ 1.20/kg, then on a full cost basis, the complete meal would cost. Total unit cost (new) = Total unit cost (old) â€“ Production expenses (old) + Production expenses (revised) Total unit cost (new) = 4.64 â€“ 0.54 + 1.20 = $ 5.30 And Profit per unit would be = Retailer price â€“ Total unit cost (new) = 4.78 â€“ 5.30 = (-0.52) (i.e) there would be a loss of $ 0.52/kg, on a full cost basis, when the â€˜complete meal is sold at $ 6.85. Conclusion and Recommendations: The point to be focused here is that though the new product might sell 85Â tons at a revised price of $ 6.85 per pack, it will incur losses on a full cost basis. Also it is not feasible to lower the production costs anymore because, the resources of A/S Dansk Minox which were specialized for meat processing were now processing Vegetables. This is not their core competency and hence they would incur more costs in performing activities that they do not specialize in. Furthermore, the need for a single package containing sliced pork and red cabbage salad is itself questionable because the same packs are also individually available and these individual packs are of better quality because slice pork is Dansk Minoxâ€™s speciality and red cabbage salad is its competitiorâ€™s specialty. Hence, it is recommended that Dansk Minox stop further production of â€˜complete meal (because red salad is not its core competency) and concentrate on selling its â€˜standard packs, which are in fact having a significant boost in their sales or the management can look to collaborate with the best â€˜red cabbage salad making company and together give the customers the best quality of â€˜complete meal at the best price. The final decision would however be dependent upon managerial discretion and organizational guidelines/objectives.
12/19/2019 0 Comments
Wedgwoods Supply Chain Management - Essay Example Rudzki et.al) Planning: A strategy is to be developed for the cost-effective utilization of resources required to develop the product that meets the demands of customer. The planning of the supply chain thus should be such that it is efficient, less costly and the products that are delivered are of high quality and value to customers. Source: The important thing is finding suppliers, who can effectively deliver the services or goods to the customers. An improvement in the relationship should be developed with the suppliers for delivery, payment process and pricing. In short, improving the processes for the management of inventories received from the suppliers including receiving, verifying shipments, transferring to the manufacturing facilities and authorizing payments to the suppliers. Making: This is the step, manufacturing step, where intensive study is required to improve the quality levels, production out-put and workers productivity. For the effective delivery of the goods, there should be scheduling of activities such as testing, packaging and preparation for the delivery. Delivering: This is referred to as logistics, there should be an improvement in the coordination of the activities such as taking the receipt of orders from customers, developing a network of warehouses, picking the carriers so that customers receive the products and setting up an effective in-voice system for payments. Returning: The most important and the problematic part of the supply chain that needs improvement is creating a network for receiving defective and excessive products from the customers and checking the delivered products which have problems and supporting customers with problems. Operation management issues at Wedgwood: The company adopted the inflexible push model which is driven by the forecasts of the expected sales which were generated centrally, and the challenge for the company is now that the company is finding hard, to match the high quality of the product with equal levels of service to the customers. According to the operations director of the company, when benchmarking was done with the other companies, they found out that there is a need for improvement in the area of customer service and responsiveness. The overdue orders were high, despite there were high inventory levels. The main objectives of the company is thus to reduce inventory, cutting the supply cycle time. The company therefore has decided to overhaul the supply chain processes to achieve the goals. As identified by the experts of operations management of the company, in three areas of the supply chain. Dealing with customers and order fulfilling is the first one, the second area is operations in the manufacturing and supply, the third one is introducing new products To tackle the problems, the company formed different teams to tackle each area, the teams were instructed to look into the key processes which are existing and bench mark them against the other parties so that they can redesign. The teams were supported by the methodology and expertise from the consultancy wing of the Texas instruments. The main objectives of the company are reducing the inventory, cutting the supply cycle time and overall improvement of the customer services. (Buy IT, 2002). Key performance objectives at Wedgwood: Existing model has been changed to the pull model driven by the real demand from the customers, even this new
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