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
S.No. 1997, W.M.D.C., Ambethan Road, Chakan, Near Gandharv

Company Address

Hotel, Pune - 410502

Gat No. 624/4 Shop No.01 , Opposire ASAL COMPANY ,Chakan

Factory Address

Alandi Road, kurali .Tal Khed - 410501

Establishment Year

2013

Firm Type

Industries

Business Type

Industry / Manufacturing
Manufacturing all type of corrugated boxes, boards, sheets &

Products & Services

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

WEAKNESSES

OPPORTUNITES

THREATS

Low cost
manufacturing

New Entrant

CAGR of around
15% till 2017

Hike in raw
material price
upto 30%

Latest Equipment
Excellent Service
through
Convenient
process
Growing Network
from agricultural
products to
automobile
products

Logistics and
Infrastructure

Continuous
Expansion of
E-Commerce
Industry

No regualtion in
regard to enter
market

Strengthning of
Manufacturing
Sector

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

4) Ahmednagar

5) Baramati

3) Nasik

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
Ahmednagar
Nasik

Jalgaon
Aurangabad
Baramati

Destinations
Sinnar
Igatpuri
Dindori
Nifad
Chandwad
Yawal
Raver
Bhusaval
Chalisgaon
Aurangabd
Baramati

Aggre.
Demand
Demand
(Kg)
(Kg)
1000
2000
1000
5000
1000
7000
1000
1000
3000
6000
1000
1000
2000
2000
1000
1000

Also, different routes are

Routes

Km

From

To

Pune

Aurangabad

239

Pune

Jalgaon

449

Pune

Nasik

211

Pune

Ahmednagar

127

Pune

Baramati

110

Different cost associated with transportation through different routes are as follows

Route

Weight

Freight

Miscell.

Charges

charges

Loading/Unloading

Total

No. of

(Rs)

Trucks

Trans.
Cost
Rs/ kg

2000

4085

1634

500

6219

3.1095

6000

7235

23152

1800

32187

5.3645

7000

7235

22000

2000

31235

4.462143

2000

2406

962

500

3868

1.934

1000

2150

2000

300

4450

4.45

Followings are the cost associated with transferring goods from warehouse to respective
destinations.
Freight

Per unit

Charges

charge

1000

1000

62

3000

4000

1.333333

Bhusaval

26

1000

700

0.7

Chalisgaon

50

1000

1000

From

To

Km

Weight

Jalgaon

Yawal

50

Jalgaon

Raver

Jalgaon
Jalgaon

Freight

Per unit

Charges

charge

5000

6000

1.2

40

1000

1000

60

1000

1000

From

To

Km

Weight

Nasik

Dindori

50

Nasik

Nifad

Nasik

Chandwar

Freight

Per unit

Charges

charge

1000

1200

1.2

1000

1000

From

To

Km

Weight

Ahmednagar

Sinnar

60

Ahmednagar

Igatpuri

45

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:

z 3.1095P1W 1 5.3645P1W 2 4.462 P1W 3 1.934P1W 4

Minimize

4.45P1W 5 W 2C1 1.33W 2C 2 1W 2C 3 W 2C 4

1.2W 3C1 W 3C 3 1.2W 4C1 W 4C 2

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