Cost management plays a major role when maintaining profit margins. Management must be able to find in which areas of a business costs must be reduced and the consequences that such reductions have in the overall company. In some situations management must change the way the work is being done in order to decrease costs while in other cases changing one supplier for another might be enough, in both situations a tradeoff will occur and the consequences will impact the company as a whole. Rocket-Blast, LLC, a beverage maker, has seen its profit margins reduced which presents a real problem for the company going forward (Precord & Macdonald, nd). Management has decided that operating costs must be reduced in order to increase profit margins to …show more content…
The company believes that reducing these detention charges will require one of two possible solutions. The first possible solution is to increase the workforce and reduce working hours in order to have more employees during the morning to unload the trailers faster thus lowering detention costs (Precord & Macdonald, nd). If hours are reduced workers might feel that other measures that affect their working conditions could be taken by management and they might join a union to prevent such measures (Precord & Macdonald, nd). A union that was present in a beverage plant in the area was the most likely choice for the workers and this union had a history of confronting management a lot (Precord & Macdonald, nd). If workers join a union the ability of management to make decisions in the long run could be undermined so increasing the workforce and reducing hours should be a solution that must be closely analyzed from a short and long term perspective. The second solution is to change the current keg supplier and/or the current syrup carrier for another that would result in lower detention charges (Precord & Macdonald, nd). Salt Lake Kegs, a keg supplier and Great Plains 3PL, a 3PL company, were being considered as alternatives to the current keg supplier and syrup carrier (Precord & Macdonald,
The purpose of this case study is to explore the implications for expanding the products offered by Mountain Man Brewing Company (MMBC) from one product, Mountain Man Lager, to adding a Light version of the beer. This paper will evaluate the following:
Lower profit discourages investment and gives an appearance of poor performance despite how well the business is performing. Low margins also leave little room for market fluctuations and situations like holding inventory longer alone, may lead to profitability issues.
Executive Summary- Mountain Man Beer Company (MMBC) is experiencing declining sales for the first time in the company’s history. Chris Prangel, who will inherit the family-owned business in five years is faced with a hard decision that whether to take the risk of launching a new product to attract younger customers or to follow his father’s steps, continuing doing the 80-year-old Mountain Man Lager business. His father has concerns about the profit, the core business and the cannibalization and Chris has done several researches to estimate the potential business opportunity of the new product Mountain Man Light Through an analysis about the company, the product and the market, it is clearly beneficial for MMBC to launch Mountain Man Light. But Mountain Man Lager is the core business without which it is impossible to develop a new product and grasp a new market share, which is the spirit of the decades-old brand. Therefore, while I recommend that launching Mountain Man Light to create a new business, appealing to younger and female customers and making profit, Chris should take these strategies into account: keeping enough effort on existed product and holding the top market position, developing the brand and expanding the product line, if he plans to make profit from the new product in two years.
This implies Primark is not rely on one particular supplier. The company is capable switch to another supplier easily if the costs increase. Hence, Primark can control the costs as well as improve its margins in the long term.
The desired outcomes from cost reductions, such as reducing the workforce by almost half and eliminating management bonuses, are to reduce cost of goods and increase operating income. Although Harnischfeger’s cost of sales (COS) has increased from 1983 to 1984, the company appears to have reduced COS in comparison to sales from 81% to 79%. In addition, it has increased its Operating Income from $62 million in 1983 to $90 million in 1984.
The benefits of these assumptions are that while maintaining the current growth rate of 13%; we can maintain our COGS. One of the major factors contributing to the firm’s poor profit margin is operating expenses.
Finally, I have suggested some recommendations for the issues that I have mentioned above. In reference to the first issue, it will be profitable for the company to change to level monthly production.
[6] Colin Drury, Management and Costing Accounting, (7th edition), Chapter 8, Cost-volume-profit analysis, p. 165-173
Happy Chips, Inc. is faced with a serious problem, with only having one mass merchandise customer called “Buy 4 Less” being unhappy with the company’s operating performance. Buy 4 Less had several problems cited including frequent stock outs, poor customer service responsiveness, and high prices for the products being supplied. Buy 4 Less came up with solutions they think seem fit to fix the problems they found with Happy Chips, Inc. and if Happy Chips, Inc. wishes to remain a supplier to their company they will have to incorporate these changes. The problem however with this scenario, is that employees of Happy Chip, Inc. are not happy with the demands Buy 4 Less has bestowed upon them which include providing direct store delivery four times a week instead of three, installing an automated order inquiry system to increase customer service responsiveness, and decreasing product prices by 5%. Even though the easiest thing for Happy Chips, Inc. to do is to agree to the changes Buy 4 Less wants them to do, Wendell Worthmann, the manager of logistics cost analysis doesn’t agree to the changes right away. The main problem with this case is that Buy 4 Less is Happy Chips, Inc. one and only mass merchandise customer that accounts for 400,000 annual unit sales and 12% of annual revenue. With the mass merchandise segment having such a high profit potential, Happy Chips, Inc.
Breckenridge Brewery has a strong business in brewing beer. Due to the lack of professional management expertise and venturing into the wrong business, the company has not been able to turn in a profit. It is important that the company try to resolve these problems as soon as possible. Only then, will the company get out of the red and hopefully, move on to a higher level.
Cost leadership strategy involves the business winning the market share by appealing to cost-conscious and price-sensitive consumers. This is achieved when you have the lowest prices in the target market. The lowest price of value ratio (price compared to what consumers receive). To be successful at offering the lowest price while still achieving profitability and a high return on investment, the business must be able to operate at a lower cost than its competitors. There are three main ways to achieve this.
...ld 318). The costs of a quality system must be managed so a reasonable value-to-price-relationship can be achieved. High quality will help a company increase profits through lower costs. It is critical that management focus on long term objectives instead of taking a limited outlook on growth and market share. The strategy of focusing on the customer and quality will equate to greater market share and higher profits. Reducing costs should be part of the continuous improvement process. Strategic cost management is the process of utilizing cost information to formulate and communicate strategies to all levels of the organization. A balance must be obtained to provide the customer with a quality product at a cost that provides for a profit for the company. The potential customer is becoming more and more conscious of quality. It makes sense for a business to cut their costs by improving the quality of the product thereby enhancing the appeal of a product or service in the market place. The challenge is for each business to strive for the kind of business culture that will succeed in spite of the unknown and the unknowable. The quality management philosophy searches for this culture.
Thus a management method that specifically meets your wants of a transforming organization is extremely much essential in addition to supply chain management requires businesses to examine every process in his or her supply chain and identify areas which have been using unnecessary resources that are measured in dollars, time or recyclables. This will improve the company's competitiveness in addition to improve the company's general profitability.
3. The factors that affect the cost management are competition, growth in the same industry as the company, and improvements in manufacturing technology.
Cost optimization: Determine the product costs by tracing detailed cost using analytical tools. To maximize profit by detect precise cost of products, optimize margins by inventory valuation.