Phase II - Board Meeting 2012

Phase II - Board Meeting 2012

To exceed our customers expectations in

quality, delivery, and cost through continuous improvement and customer interaction.

Phase II - Board Meeting 2012

Roles and Responsibilities

Vice President
Purchasing & Distribution

Vice President
Finance

Vice President
Marketing & Sales

Vice President
Production & Human Resources

President & CEO

Rahul NP

Shebin Chandran

Neeraj Joshi

Sanjay Singh

Snigdha Tripathy

Forecasting of Sales & Purchasing of Raw materials and Finished Goods

Sourcing and management of funds & Oversee the D/E ratio.

Marketing decisions communication , advertising & Sales branches spending

Production decisions & Human Resources turnover

Oversee the implementation of the Companys long and short term plans in accordance with its strategy.

Phase II - Board Meeting 2012

1. To review the Phase II performance. 2. Learn about the performance of each period through speakers. 3. To understand the performance vs. Goals. 4. Provide another opportunity to plan for the future. 5. Hear areas of concern or interest.

Phase II - Board Meeting 2012

Phase I Results

Phase II - Board Meeting 2012

Phase I Results Throughput time reduced by a day. Single shift 40 days to 39 days . Global market share : 34% across regions & markets. Alesa 30% Bordo 44% Employee turnover 2.52% Debt /Equity ratio 154%.

Phase II - Board Meeting 2012

CARTI

Price sensitive market.

Factoring can help manage cash flows.

Transportation of goods should be in sync with production.

Phase II - Board Meeting 2012

Phase I Learnings

Manage debt to equity ratio. Invest in Lean Management , TQM & Production Technology to improve production time & quality. Maintain inventory & utilise capacity. Invest in sales branches. Beware of the typo errors when entering data.

Phase II - Board Meeting 2012

Phase II - Board Meeting 2012

Increase the market share of the company to 45% globally. To become the market leader in the India

Become largest supplier of Carti in China and India by the end of Phase II.

Phase II - Board Meeting 2012

Scope of activities Broad Narrow Market Market Basis of advantage Cost Leadership Cost Focus

Equal Benefits

Cost Differentiation Product Differentiation Differentiation Focus

Higher Benefits

Phase II - Board Meeting 2012

1. Continuous improvement focus 2. Organisational development & training 3. Economies of scale

Cost Leadership

Phase II - Board Meeting 2012

Period Zero Phase II

Started at an equal footing in terms of market share - 33% . Profit : Euro 1,218,652 . Debt to Equity Ratio : 107.42% Throughput time Single shift 40 days. Double shift 25 days 160 machines & 327 personnel.

State of the economies of the market regions Germany USA China India

Phase II - Board Meeting 2012

Forecast Factor

Units to be sold

Production planning

Sales & comm.

Transport and storage

Purchase planning

Costing

Income statement

Status after Period 0

Sales
Revenues of 31.7mn 33% market share in each market for all products

Production
Alesa Production time Rejection rate 40.00 4.00 57,150 Bordo 18.00 8.00 100,000 Carti 36.00 10.00 14,500

Quantity produced

Purchasing
Finishing stock
50,000 40,000 30,000 20,000 10,000 0 Aurit Bekat Calot Dimut

Finance
PBT 1.21mn Cash reserves 7.93mn Debt/Equity 107%

Strategy for Period 1

Goals for the period
Increase the market share of Bordo by 7% globally. To gain market share for Carti in India by 3%.

Planned Strategy Reduce the cost of production by investing in Lean Management by 7%. Reduce the production time by spending in Production Technology by 10% Increase the customer base by spending in sales and advertising by 10%.

Decision for Period 1

Production Estimated demand of 212000 increase of 23% 57% increase in training 10% increase in TQM and production technology spend Sales Increase in price of Carti by 1.5% in China and India Product policy and communication policy spending maintained

Purchasing
1.5% increase in raw material costs No goods ordered in Finance Factoring in Germany and USA to meet the increased expenses Exchange rate fixed in USA, China and India

Results for Period 1

Sales

Market share of Carti in India reaches 40% Rise in market share of all three products in China by 2% points

Fall in production time by 2% and rejection rate by 1%

Production

Finance

2.5% increase in revenue to 32.5mn Profit of 0.32mn

Analysis & Lessons from Period 1

Low investment in Lean management, Production Technology and Sales & Advertisement Invested more on communication policy on Alesa as per Industry average and less was invested on Bordo & Carti. Followed a conservative approach- Should have invested more on the stated activities as ended up with cash of 15.2 million Euro & a Debt/Equity ratio of 89.21%.

Status after Period 1

Sales
Revenues of 32.56mn
50,000 40,000 30,000 20,000 10,000 0 1 2 3 4 Alesa Bordo Carti Total Production time Rejection rate Alesa 39.13 3.96 52,350 Bordo 17.60 7.91 118,000 Carti 35.21 9.89 0

Production

Quantity produced

Purchasing
Final stock
25,000

Finance
PBT 321656 Cash reserves 15.23mn Debt/Equity 89%

20,000
15,000 10,000 5,000 0 Aurit Bekat Calot Dimut Final stock

Strategy for Period 2

Goals for the period Increase the market share of Bordo by 3% globally. To increase market share for Carti in India by 5%. Planned Strategy Cost reduction by investing in Lean Management of 10%. Increase spend in TQM by 5% and maintain the same in all periods to maintain the quality of goods above 100%. Improve production time by increasing spend on Production Technology by 15% Build up inventory to meet demand in period 3 to account for 15 days of employee vacation

Decision for Period 2

Production 41% increase in units produced 100% capacity utilization with overtime Increase production of Carti to adjust for stock-out in Period 1 Sales Marginal increase in prices to meet increased variable cost 23% increase in branch store spending to meet increased inventory cost

Purchasing
29% increase in cost of raw material 70000 units of goods ordered in Finance Factoring in Germany and USA to meet the increased expenses Expected increase in debt to equity ratio

Results for Period 2

Sales

Increase of market share of Alesa in all markets. 40% market share in India Fall in market share of Carti by approx 27% points

Carti production failure leading to stock-out Fall in production time by 3.5% and rejection rate by 1.7% Production Excess inventory for Alesa and Bordo

Finance

34% increase in revenue to 43.8mn Loss of 3.39mn

Analysis & Lessons from Period 2

Overestimation of sales in Period 2 and Period 3 by 77500 units Production of Alesa and Bordo in excess of requirements in period 2 and estimate in period 3 Underestimation of production capacity leading to Carti not being produced Loss of revenue of 5.2mn due to stock-out of Carti Rise in storage and transport cost due to excess inventory

Status After Period 2

Sales
Revenue of351,601,25 43.8M
400,000,000 300,000,000 200,000,000 100,000,000 0 0 142,398,90 4 24,763,872 Alesa Bordo Carti Aurit 0 Bekat 0 Calot Dimut Germany U.S.A. China India 69500 43500

Purchasing
Raw Materials Inventory
Inventory

Production

Capacity in the period 165 Machines Trained persons 333

Planned vs Actual
100% 50,000 50% 60,000 0% Alesa 150,000 30,000 150,000 Bordo Planned Actual Carti 0

Finance
Loss of 3.3mn Cash On hand 6.4mn D/E Ratio 92%

Strategy for Period 3

Goals for the Period Increase the market share of Bordo by 5% globally. To increase market share for Carti in India by 5%.

Planned Strategy
Continue focus of cost reduction by investing in Lean Management by 5%. Increase the spending in sales and advertising by 10% for Carti and Bordo to increase in China and India. Reduce advertising and marketing spending for Alesa by 15% Maintain the debt to equity ratio below 130%.

Decisions for Period 3

Purchase
47% reduction in order of raw materials to utilize inventory No ordering of bought in goods as deliveries was received from Period 2

Production
Changing the priority of production plan from (2-1-3) to (31-2) for Alesa-Bordo-Carti 50% increase of investment in TQM & Production technology

Sales
Marginal increase in the price of products to cover variable cost 20% increase in training of sales personnel for India & China

Finance
Planned profit/Loss : 5.4mn D/E ratio : 110% Long-Term Loan : 0.5mn

Results for Period 3

Sales

Increased the market share of Carti in India by 12% Bordos market share increased by 3.24% globally

Reduced through put time from 39 to 37 days 3.2% reduction in production time for each models Production 1.3% reduction in rejection for each model

Financial

Loss of 2.3mn Debt /Equity of 129%

Analysis & lessons from Period 3

Delivery capacity of Sales branches in Germany & USA were less than the total demand Loss reduced by 1.04mn from Period 2 Storage Cost of finished goods and raw materials increased by 0.6mn Increased the Sales revenue by 0.1mn with no stock out

Status after Period 3

Sales
Revenues of 45mn
60,000 50,000 40,000 30,000 20,000 10,000 0 Alesa Bordo Production time Rejection rate Alesa 35.38 3.80 32,175 Bordo 15.92 7.60 45,300 Carti 31.84 9.49 40,000

Production

Carti
Total

Quantity produced

Purchasing
Final stock
1.2 250,000 1 200,000 0.8 150,000 0.6 100,000 0.4 0.2 50,000 0 Aurit Bekat Calot Dimut Final stock

Finance
Net Cash of 8.7mn Loss of 2.3mn Debt/Equity: 129 %

Strategy for Period 4

Goals for the period
To increase the profitability of the firm by 7%. To increase market share for Carti in India by 5%.

Planned Strategy
Continued spend in lean, TQM and Production Technology Reduce investment in advertising and communication by 5% Achieve 100% capacity utilization Minimize inventory from previous period

Decision for Period 4

Production
Production increased in addition to the forecast to achieve 100% capacity utilization

Purchasing
Raw materials ordered as per sales forecast

Sales
5% reduction in product policy for Alesa 5% increase in product policy spend for Carti 2% reduction in prices across markets in Carti

Finance
Factoring in all markets except USA

Results for Period 4

Marginal fall in market share of products in all markets
Sales

Fall in production time by 5.5% and rejection rate by 1.2% Overall fall of production time by 17% and rejection rate Production by 6% from Period 0

Finance

17% fall in revenue to 37mn Loss of 450,000

Analysis & Lessons from Period 4

Choice between - Running plant at 100% and incurring increased variable and inventory cost - Selling excess capacity of 20 machines and lay off additional staff Running plant at 100% more cost efficient Price reduction may result in loss of customer confidence and market share

Phase II - Board Meeting 2012

Silos between few functions

Working together

Phase II - Board Meeting 2012

All departments need to work together .

Invest on quality - Improvement of the product ,process & employee morale.

Inventory is not bad But should be managed efficiently

Phase II - Board Meeting 2012

Effective demand forecasting generates an accurate understanding of future marketplace demands. Spend enough on marketing ,advertising & communication.

Build strong customer loyalty - by delivering on the promise of quality & on-time delivery

Phase II - Board Meeting 2012

Phase II - Board Meeting 2012

Throughput time :Single shift : 33 days. Double shift : 21 days Production time :Alesa :33.39 mins. Bordo :15.03 mins Carti : 30.06 mins

Quality index : 104.79 Adherence to delivery dates index : 100 across regions Turnover of personnel :1.85% Debt to equity ratio : 116%

Phase II - Board Meeting 2012

Germany

USA

China

India

Phase II - Board Meeting 2012

Focus on China

BORDO needs attention

Cash in on the Alesa market

Continue investment on Lean Management

THANK YOU