Name: PRAVEEN.S.

J

ID: PGXPM152PRS

PGXPM
MANAGERIAL ACCOUNTING - (TAKE HOME EXAM) - Weightage 55%

You have been assigned as a leader of a cross functional team of internal
consultants to your CEO and the Board for your company.
Your company is faced with dwindling profit and constant chaos
due to:
1. Intense competition from local competitors
2. New entrants from China/Vietnam with very low prices
3. Increasing inventory of great products which used to be fast moving
4. Lack of coordination with supply chain decisions and customer
demand from CRM
5. Customers of least profit getting maximum attention and more
profitable customers defecting
6. Sales Force placing unreasonable demands coupled with production
interruption
7. Lack of integrated and coordinated planning and control
8. Cost based pricing creating havoc in the profits
9. Escalating support costs and huge growth in indirect costs and
10.Lack of motivation , poor performance on the part of senior
management and attrition

Answer required all (Two) questions:
1. Write a report to strategically fix all these problems with clear
execution and implementation steps so that the organization is
managed effectively and efficiently for excellence and regains
profitability and high morale.
You may also use all or most of the topics discussed and the 10 key
takeaways.

2. Also extend these to your own company identifying and mapping
these issues with similar realistic issues in your organization. How
will you incorporate a forward looking visionary management to
perform better by at least 20 % in all aspects of operations and
management and profitability?
Name: PRAVEEN.S.J

ID: PGXPM152PRS

Q- 1: Write a report to strategically fix all these problems with clear execution and
implementation steps so that the organization is managed effectively and efficiently
for excellence and regains profitability and high morale.
You may also use all or most of the topics discussed and the 10 key takeaways.
Solution:
Cross-functional teams are teams that are not aligned on one functional level.

The representatives of a cross functional team are from a wide array of

specialties such as –Finance, Consulting, Accounting, Operations- and each

person is highly skilled in their own departments. This diversity and high skill of the

team is reason for both its effectiveness and as well as conflicts in the team.

To effectively lead a Cross Functional team (CFT)

 Deploy a Shared leadership Model where through interactive
influence process each Individual can influence the peers with their unique
perspectives, knowledge and capabilities.

 Communicate clearly and Widely, Cross-functional teams can
include team members from across the whole organization, therefore
everyone should be clear that the team's objectives aren't forgotten or
dismissed.

 Tasks must be tightly coordinated and organized, and yet
representatives of the team must have free hand to exercise their
expertise as needed.

Addressing the Problems

1) Intense competition from local competitors:

2) 2) New entrants from China/Vietnam with very low prices

The above two factors talks about competition and pricing from
competitors in the market. Let’s see ways in which it could be tackled.

Cross Functional Team Leader should analyze the impact of competition on
all the functional departments under the team and decides what steps
needs to be taken to combat the competition from the competitors.

Competitions are very useful to businesses because they act as a source
of feedback.
Name: PRAVEEN.S.J

ID: PGXPM152PRS

According to Porter’s generic strategies a company pursues Competitive
advantage in its market scope with the below factors

 Lower cost (Price)

 Differentiated value (Quality)

 Focus( Service)

Price: you can choose to beat the competition by offering the lowest prices

Quality: You can choose to beat the competition by offering a superior
quality than others.

Service: or you can choose to beat the competition by offering an
unforgettable customer service.
Try to understand your competitor by doing detailed analysis of each of the above
factors

What is the approach towards their pricing?

What is the differentiated value in the product they provide?

What is the approach to their service and focus to the customer?

After a thorough study on the competitors. Identify the areas that your
products needs to be worked upon.

Address the following focus areas

Win the Price War

Try to analyze whether there is a scope of reducing the production cost of
a better performing product and shift focus from Economies of Scope to
Economies of Scale.

Economies of scale - Low cost of production.

Another of winning the price war is not to indulge in any price war. When
the competitor slashes the price take the opposite route of providing
superior value and not reducing the price.

Make or buy decision

Analyze the production cost and how it can be reduced by outsourcing it
to third world countries where Manufacturing, Labor, Raw materials cost
are much lesser.

Define your Brand
Name: PRAVEEN.S.J

ID: PGXPM152PRS

No two products are the same just as how two customers are not alike,
hence the need for branding. What’s different about your product in
comparison to other businesses in your industry?

Define your Competitive Advantage

As mentioned above the 3 key focus areas for

Price; Quality; Service. Focus on these areas and establish a
competitive edge over your competitor. Your competitor may not be a
leader in all of the 3 areas. Identify your strong area here and make it
stronger.

Product Innovations

People will not stick with products that has no zeal for innovations.
Innovation brings excitement to the marketplace and customers like
excitement. New innovations could be patented and this brings significant
edge over competitors

Communicate with your Customers

It costs 20 times more to get a new customer than to keep an old
customer so communicate with your customer and record their honest
feedbacks and work on areas of improvement and customer demand.

3) Increasing inventory of great products which used to be fast moving

When you think of streamlining your business and increasing your profits,
the first step is to minimize overhead costs. One of the major reasons for
overhead costs in poor Inventory Management.

One of the major reasons that customers buy alternate products is “Out
of Stock”. Great products which are in high demand in market place lose
out because of poor inventory Management. These happen because of -
Poor Sales forecasting, lead time delays, Inaccurate Time
between Orders (TBO). Some of the corrective actions that could be
taken are

Introducing Inventory Optimization Tools

Optimization tools studies demand variability, supply variability,
and other parameters to accurately determine the inventory to hold in
order to guard against that variability.

Real-time analytics

Real time data of demand, Supply and financial data gives us metrics
and information at a minute level of granularity through which rapid
scenario planning can be done to meet the customer requirements. Real
Name: PRAVEEN.S.J

ID: PGXPM152PRS

time analytics gives a real picture of the demand of a certain product in a
certain geographical location which can be tracked back to appropriate
Supply chain unit which warehouses the Inventory and whether sufficient
Inventory is available, else a rapid scenario planning can be sketched out
to meet the demand.

Slotting and Supplier options

Proper slotting not only ensures much needed space, but appropriately
locates the fastest-moving items closer to docks and more accessible
locations, minimizing travel distance and maximizing overall throughput
and productivity. Also think of more supplier options in case of failover or
untoward calamities.

4) Lack of coordination with supply chain decisions and customer demand
from CRM

It is very important to have a complete knowledge and understanding of
how the supply chain network structure is structured. Three primary
aspects of an organization’s supply chain network structure are: (1) the
members of the supply chain, (2) the structural dimensions of the
network, and (3) the types of process links across the supply
chain.

Integration with Sophisticated ERP:

After identifying the primary aspects, the data belonging to these aspects
needs to be integrated into the ERP system. SAP is one powerful ERP tool
which major corporations adopt for effective SCM.

Just adopting ERP will not resolve the issue. Appropriate logging of data
against each of the primary aspects of SCM network

Many major Corporations have identified effective supply Chain needs
effective management of the below processes.

• Customer relationship management - The first step toward
integrated SCM is to identify key customers or customer groups, which the
organization targets as critical to its business mission.

• Customer service management - provides the single source of
customer information. It becomes the key point of contact for
administering the product/service agreement. Customer service provides
the customer with real-time information on promised shipping dates.

• Demand management- A good demand management system uses
point-of-sale and “key” customer data to reduce uncertainty in demand
variability.
Name: PRAVEEN.S.J

ID: PGXPM152PRS

• Order fulfillment- The key to effective SCM is meeting customer need
dates. It is important to achieve high order-fill rates either on a line item
or order basis.

• Manufacturing flow management- Manufacturing processes must be
flexible to respond to market changes. This requires the flexibility to
perform rapid changeover to accommodate mass customization.

• Returns- Managing returns as a business process offers the same
opportunity to achieve a sustain “Return to available” is a velocity
measure of the cycle time required to return an asset to a useful status.

5) Customers of least profit getting maximum attention and more
profitable customers defecting

The leader of the cross functional team should have insight to identify

Customers who are high profit contributors. This can be easily done using
80/20 profit distribution rule.

The analysis of the 80/20 profit distribution by customer can be easily
done using in a spreadsheet. The business data needs to be arranged in
three or four columns: Category (Customer-Parent or account location),
Value (sales revenue and profit) and Cumulative Percentage of the
values; all sorted in decreasing order (of value).

Analyzing the 80/20 principle we can find that the top 5% of the
customers generates close to 50% of the profits while the bottom 50% of
the customers generates only 5% of the total profit.

This analysis is significant to understand who the strategic
customers are, how they are different from key customers and standard
Name: PRAVEEN.S.J

ID: PGXPM152PRS

accounts; Secondly identify those in the cash drainer group to either make
them profitable or yield them to the competition.

With the above insights and analysis a company can start to initiate
customer intimacy and loyalty programs to most profitable customers

1. Offer special discounts or accelerated loyalty rewards earning
rates

2. Invite top customer towards appreciation events

3. Provide frequent special top customer gifts or recognition.

4. Invite your top 1-3% of customers to participate in an invite
only customer advisory board or insights group event every
year

After such programs reflect back on the results. One way of doing it is
Track the increased profit accrued to the product or company for each
additional customer who stays loyal to the company.

6) Sales force placing unreasonable demands coupled with production
interruption
A Cross functional leader should identify

Factors influencing the unreasonable demand.

It would constitute both internal and external factors.

The internal factor such as sales forecast should be based on inputs received
from all the departments (like purchase, Orders, Servicing production, marketing
etc.) of the organization.

The external factor like sales forecast should be based on past pattern of sales
which include past experience combined with detailed past sales by product line,
geographic region, and type of customer.

When the sales forecast predicted wrongly, there are going to be multiple
overheads such as

 The produced goods are going to be underutilized.

 The inventory costs to warehouse the extra goods

 Reduce the price of the product below the production resulting in less
profit or loss.

If the actual sales are greater than the forecasted sales the production capacity
needs to increase by putting more resources with higher prices. Additional
resources may lead to increase in final product cost
Name: PRAVEEN.S.J

ID: PGXPM152PRS

Steps to regulate and contain Unreasonable demand

Postponement: Delay the point of product differentiation by producing a
generic product based on total product demand, then customize when necessary.
This allows for a cost and time-effective way to reconfigure a product quickly
should there be a supply disruption.

Strategic stock: While holding inventory could be considered unreasonably
expensive, stocking in advance of demand by placing a shared inventory stock at
certain strategic locations to be shared by multiple supply chain partners can
reduce risk of supply loss due to warehouse damage.

Rebalancing of the supply chain: Have more than one supplier to be able to
immediately switch to in the case of disruptions and maintain a flexible supply
base.

7) Lack of integrated and coordinated planning and control
A cross functional team consists of representatives from many functional units,
Establishing integrated and coordinated planning and control to this team is
going to be huge challenge.

As a leader of the team should ensure the below guidelines are met

 A master plan for the cross functional team needs to be charted and
floated across. This plan needs to be constantly revisited and progress
should be tracked against each of the items defined in the plan.

 a common, compelling purpose—All team members are committed to
achieving a shared vision, the shape of which they have influenced;

 Overcoming the limitations of hierarchical structures—Teams can facilitate
dialogue and an understanding of processes that cross hierarchies,
departments, and regions.

 Increasing organizational flexibility—Teams can be quickly assembled,
deployed, refocused, and disbanded;

 Measurable performance goals—The team measures its own performance
by assessing collective work products and progress toward its mission.

8) Cost based pricing creating havoc in the profits
Cost based pricing is relatively simple; you figure out your cost of goods, set a
desired margin for each unit, add that margin onto your costs and you have your
price.

As a Cross functional team leader identify the limiting factors and mistakes
identified in Cost based Pricing are

 Cost based pricing limits your ability to price to different
segments of the market- A cost incurred to develop Business class
plane seat and economy class seat is same. If they do cost based pricing,
Name: PRAVEEN.S.J

ID: PGXPM152PRS

they would lose out on the profit for the value they provide for business
class.

 Customers don’t care about your costs, they care about the
product attributes they value- Customers who are willing to pay for the
product does not worry about cost incurred to produce the good rather the
value it gives the price.

 Unrealized revenue and profit can be substantial- By following cost
based pricing amount of missed opportunities of revenue is huge.

Introduce value based pricing

 Identify the customer’s options and alternatives to your product or service.
If the alternate product is less value to him, price at a percent higher than
the competition.

 By introducing Value-based pricing use a fair degree of advertising to
communicate the value of a product or service to the target market.

9) Escalating support costs and huge growth in indirect costs

As a team leader of cross functional team
All supporting functions should be challenged to confirm that they operate
as simply and efficiently as possible and make the best use of new
technology without overcomplicating things.

Follow the below guidelines to reduce the support and indirect costs

 Reduce the demand for services- Once managers decide which
capabilities are essential, they can turn their attention to demand.

 Removing internal management centers and layers- Duplicating
organizational operational units across geographies.

 Cutting time intervals and the number of end ‘products-

Examples

- To change payrolls from weekly to every other week –

- To provide information ‘on demand’ rather than routinely

 Evaluate the demand which indicates the extent to which these support
services are needed.

 Improve the efficiency of these support services by defining service level
agreement and making the services ‘Lean’.

Control of overheads consisting of fixed and variable becomes possible by
controlling and monitoring activities. Linkage between cost and activities
Name: PRAVEEN.S.J

ID: PGXPM152PRS

are clearly identified in activity-based costing and thus provides
opportunities to control overhead costs.

10) Lack of motivation, poor performance on the part of senior
management and attrition
As a Cross functional team leader, it is important to address poor
performance of the senior management because the bad performance of the
senior management trickles down to all the other functional units of the team.

The factors contributing to this in a cross functional team are

 One functional team doesn’t get incentivized like other functional units.

 Does not share the larger goal or vision of the cross functional team

 Less decisional authority or power among other functional units

 Perceived low value of a functional unit

Mitigate the above factors

 Build positive Team Dynamics, Environment of open
communication and trust among teams from various
functionalities.

 Dedication to performance and implementation—The team
is dedicated to enhancing the organization’s performance, for
example by improving productivity, quality, value to the
customer, and employee satisfaction.

 Build Upper Management Sponsorship and Support- One of
the team leader's main responsibilities is to ensure that the cross-
functional team has the full support of key stakeholders within the
organization. The managers in every affected functional area
must support the project.

 Set Clear Objectives- A team charter is useful here, as a great
way of keeping everyone focused. Each team member must be
reminded often of the goals. This helps the whole project stay on
target, despite the occasional outside influence.

Q-2: Also extend these to your own company identifying and mapping
these issues with similar realistic issues in your organization. How will
you incorporate a forward looking visionary management to perform
better by at least 20 % in all aspects of operations and management and
profitability?
Name: PRAVEEN.S.J

ID: PGXPM152PRS

As a technical leader/Project Manager in IT services company, I have come
across a few but not all of the above problems during execution of the
project.

Mortgage/ Loan Origination System

I work for a Mortgage or Loan origination product system. I belong to the
technical architecture and management team of the product. The product
has distinguished banks as clients all across United states, such as Bank of
New York, Huntington National bank, to name a few. We offer loan
origination system to all these banks which they expose to the end bank
customers through which avail the services of Mortgage services.

1. Intense competition from local competitors

The Mortgage industry is one of the huge banking/financial operations
sector in United States. The IT services/ products catering to this available
under this sector was very minimal in the past.

Off late there are lot of new players and local software product/services
company has come into the market providing lot of intense competition.
These new players come up with lot of differentiated services and attract
the core customers of our product towards them at much cheaper price.

To beat the intense competition we are doing the following

We tried to ask the following questions

What is the approach towards their pricing?

What is the differentiated value in the product they
provide?

What is the approach to their service and focus to the
customer?

Defined our Brand

We are trying to clearly define our brand because we feel our product is
definitely different from all the other competitive products or services in
the market.

Defined our Competitive Advantage

As mentioned above the 3 key focus areas for

Price; Quality; Service. We are putting focus on these areas and
establishing a competitive edge over our competitor.
Name: PRAVEEN.S.J

ID: PGXPM152PRS

Product Innovations

We are coming up with new innovations and features that could be added
to the product and provide better value to the customers. These
innovations and features could be patented and creates a competitive
edge over our competitors.

Communication with our Customers

We are trying to constantly communicate with our core customers and the
new customers to understand the pulse of the customer and record their
honest feedback and inputs to improve and stay updated in the market
2. Lack of integrated and coordinated planning and control

The Product has nearly 34 live clients and different customizations happening
across various clients and teams. It’s a huge challenge to Integrate and plan in
a coordinated fashion.

Some of the steps initiated to address this

 Created a master plan for the cross functional teams and floated it
across. This plan needs to be constantly revisited and progress should
be tracked against each of the items defined in the plan.

 Created a Product engineering Team (PET) which is responsible for
accumulating issues and concerns across all the live clients and
Architecture core team.

 Ensuring teams can facilitate dialogue and an understanding of
processes that cross hierarchies, departments, and regions.

 Increasing organizational flexibility—Teams can be quickly assembled,
deployed, refocused, and disbanded;

 Ensuring a platform is set where Changes that are customized for a
client is communicated to various functional teams so that Core product
is updated with the change.

3. Escalating support costs and huge growth in indirect costs

In our account there is a support team and configuration Management
team, These teams have contributed to lot of indirect costs and support costs
without adding lot of real value to the product or the profit of the product.

Taken the below steps to reduce the costs incurred by these team

 Reduced the demand for the services provided by these team

 Drafted a clear SLA to track the efficiency and costs incurred by the
services provided by the team
Name: PRAVEEN.S.J

ID: PGXPM152PRS

 Cutting down internal Management teams to handle the support and
configuration Management team thereby reducing the costs added to
indirect costs

 Automate the services provided by the support team so that manual
effort and cost is reduced.

4. Lack of motivation, poor performance on the part of senior
management and attrition.

Since there are lot of functional units which needs to work together to achieve
a larger common goal, there was lot of gaps and disconnect resulting in poor
senior management performance and attrition from the organization.

As a technical leader

Built positive Team Dynamics, An Environment of open
communication and trust among teams from various functionalities.

Providing various performance based incentives which
motivated the morale and productivity of the team.

Built Upper Management Sponsorship and Support- Ensured
that the cross-functional team has support of the organization and
sponsorship for all the initiatives they take.