Case Study of Upm-KymmeneEssay Preview: Case Study of Upm-KymmeneReport this essayQuestions ITotal quality management, TQM, is according to Blocher et.al., defined as “the unyielding and continuous effort by everyone in the firm to understand, meet, and exceed the expectations of customers” (2012, p.711). The TQM often increases the functionality, reliability and the durability of a product or a service since it focuses on the customer’s perception and definition of quality.
The process management´s (PM) idea is by focusing on the continuous improvements and processes a company has it will be able to increase the quality of their products and services. The main idea with the continuous improvements is to learn how to advance within the field of critical success factors, which is why this method is related to the TQM (Blocher et.al., 2012, p.13).
The customer focus is the core key for understanding and executing the TQM. Since TQM is based on the understanding of the customers and how to exceed their expectations regarding products and services, customers are needed to perform the method. By focusing on the customers, it will be easier to get good measurements in understanding their definition of quality. Since the TQM is connected to the process management through continuous improvements and can, therefore, be argued that customer focus is just as important for PM.
Looking at Wisapaper, they have had some problems with the TQM and started thereby little by little implement the process management. Since the TQM failed, it cannot provide support through continuous improvements to the PM, which is why one can argue that the ideologies do not support each other.
One of the most successful tools for a good customer relationship has been the customer segmentation. As one can see in Table 7.3 (Partanen et al., n.d., p.8), the customer segments are divided into five groups depending on the customers strategic importance.
Another tool is the customer profitability information, which latest was retrieved through Accounting Based Costing (ABC). By performing different analyses such as time consumption analysis, it can be determined how profitable customers are. The system through ABC also shows country-specific information when looking at profitability among customers. The profitability information can be used both for operational and strategic purposes and helps to prepare for future decisions.
The customer segmentation tool was used in order to control customer focus and a way of influence the organisational thinking. The control was used mainly towards the Bulk and Others category. Meanwhile, a more enhanced customer orientation was applied towards the rest of the segments. Looking at the customer profitability information, the tool was used to control the focus on the customer where the profitability information lays an important foundation for how to deal with different customers.
Questions IIFirstly, we need to identify how Wisapaper is operating and secondly, understand what is the typical context for ABC application. Wisapaper is a paper-converting mill and a kraft paper mill; it operates independently in UPM-Pack which is the division in charge of packaging materials. With four different main products, we consider that Wisapaper has a low proportion of overhead costs, thus a relatively low process and product diversity (limited range of paper products). Also, the ABC system is a costing approach for allocating overhead factory more precisely “to cost objects based on activities performed for the cost objects” (Blocher et.al., 2012, p.133). It is commonly used in a complex environment composed of many machines, a wide range of products, and intertwined processes, unlike Wisapaper. According to the criteria defined in the case, Wisapaper seems to fit perfectly with a Volume Based Costing (VBC) rather than ABC. This model is common to use when costs are small, or when the supporting activities are relatively similar (Blocher et.al., 2012, p.132).
Due to the success of the ABC Model at Wisatimber, Högnabba also implemented it at Wisapaper. The main issue for the management was their lack of insight of customer profitability. With their former model, they were not able to analyse customer’s profitability in reference to their size, location, ordering pace and other determining factors which ABC made possible. It also provides accurate calculations, which helped the firm to renegotiate contracts, which were a significant source of poor profitability. The critical factor was the bad allocation of time to different activities regarding the type of customer. Using ABC allowed the firm to get a broad range of comparisons and analyses, thus a clear perception of customer profitability. Refined customer profitability information serves both strategic, customer segmentation and timeframe, and operational purposes, renegotiation of quantities and frequency of delivery. Vikström made a point about the reliability of accounting figures when it comes to small products or customers. One can now rely on accounting numbers for decision-making, but the amounts captured in the system needs to be reliable, regardless of the size. Thus the management unit needs to be assured that the sufficient rigour and policy precision has been applied in the accounting department.
Questions IIIVariable Costing (VC) system only includes costs directly related to the production, such as the costs of direct materials, direct labour and variable overhead. Fixed overhead cost is not included and would be treated as a period cost and deducted after gross margin in the VC income statement. Full Costing (FC) system includes all the above costs as product cost, even the fixed overhead, which is evenly divided and distributed to each produced unit. However, this also gives managers incentives to manipulate costs by increasing inventory. ABC system allocates the overhead costs into different cost pools that are calculated by their different activity rates. Even though the process of implementing this method is highly demanding, it will result in a more accurate and
sales-directed system to estimate your overall risk and provide a more appropriate cost of production. The two main tasks of this information formulating system are to identify and allocate the overhead to, e.g. inventory and to generate its cost for sale. This information is provided in a format that can be easily interpreted by a typical sales representative or the manager. This information can also be updated after the completion of the VC. ABC systems are the main means by which a salesperson can perform the process of buying your assets.
Cost Management
The value of your assets can be greatly influenced by the number of stocks you have. If, for example, you have a small number of stocks, you could end up with more money, while you would only have one number of stocks at the end of the asset life. All of the above factors will make your ownership of some assets less relevant to their overall value, as well as your personal portfolio, which can be a very important factor in managing your business. Another factor that can be heavily affected by the use of ABCs is the age of the securities held, which can significantly influence the amount of investment income you can get from one company or to another.
The above information about inventory can be found in the asset utilization, the way you allocate inventory space, and its effects on your overall financial risk/reward. Each of the above information forms a component to your existing portfolio, and may influence the amount you put away (and pay back) during the period where the assets are available. However if you put more money into your portfolio than your expenses due to the lack of inventory when the next asset goes on sale the loss of your cash will be far less of a concern.
How does ABC work?
The ABC is not a cost. It is calculated as the value of an asset during the period the asset is being offered or sold.
The ABC calculation for inventory
The cost of an asset is the sum of: (a) the total value of all the assets in its original inventory space, and (b) the total price you pay for the asset (and/or your cash) in its original form.
What is the best way to calculate inventory
Inventory is a way to tell whether you can buy from sources that have the same valuation or market value in the same period. Usually it is the best way to evaluate current financial conditions that may result in the buying and selling of an asset in such a way as to make you feel that there exists a price that your personal holdings can at least support.
An approach to getting an estimate of inventory is to look at a series of portfolios and compare the actual return of each of them with a set of data sources. This comparison can offer insight on the future performance of one or more stocks and, ultimately, how to best allocate your money so that you have an appropriate allocation of your assets when the next asset goes on sale.
The market value of an asset is the percentage change in the asset’s market value over time. In the early stages of the investment cycle, you can estimate that your assets’ market value