SYNOPSIS

In India, the washing machine market is valued at Rs. 1500 crore and is growing at
the rate of 22% per year. The fully automatic and semi-automatic sub
category is growing at the rate of 40% and 17% respectively. Washing
machine sales are cyclical in nature and its sales commences with the onset
of monsoon.
The given case study is about “Wash Right Limited” company. Wash Right
Limited was started as a joint venture company by a leading group in 1998. The
head office (HO) of the company is based in Chennai. This company manufactures
semi-automatic and fully automatic washing machines. The washing machine
market in India has a greater value. There some factors which help the washing
machine segment to grow, as given in case study like:

• Increase in disposable income

• Rapid urbanization
• Increase in nuclear families
• Increase in number of working women
• Growth in per capita income
• Greater variety of choices
• Increasing consumerism

Some of the leading companies are Videocon; IFB; Onida; Samsung; LG &
Whirlpool. In this case study there is brief information given on the sales of the
washing machine, inventory concepts, sales promotional strategies, annual sale
reports, distribution and MIS system followed by the company, financial
accounting, training programs suggested, etc.

Following is the information given as in the case study about the washing machine
market in the year 2006, 2007 and 2008.

Major Players Controlled

2006 2007
Market 85% 70%
Share
Sales of 1.8 Million 2.2 Million
Washing
Machines

Smaller Players Controlled

2006 2007
Market 15% 36%
Share
Geographical Distribution of Washing Machine Market In India

Region Demand
North 41.5%
West 26.1%
South 24.4%
East 8%

This case study shows that company follows the Product Life Cycle, i.e., initially
the company was in introduction stage at 1998, later on it had a faster growth in
its first 3 years of its operations, and went on to the maturity stage. The company
had many advantages which helped them to survive in the market and keep the
prices lower as compared to their competitors, such as,

• Companies pricing policy

• Cost and technology advantage

When competition increased and as market conditions slowed down, WRL started
experiencing a decline in its sales.

The companies Vice President (production) suggested “Just In Time Inventory”

module. In this model activities are designed to achieve high volume production
by using minimum inventories of raw materials, work in process and finished
goods.

The companies Vice President (marketing) suggested various promotional

strategies:

• Company should start selling the washing machine’s on discount.

• Exchange schemes.
• Reduction in inventory levels.
• Customers would be given choice to replace their machines after every
3 years by paying amount of Rs.6000 any time after the 3 rd year and
the scheme would remain valid for 1 year, after that the exchange
price would increase by Rs.1000 every year.
• Reviewing the policy of overstocking raw materials.

Due to such problems arising in the company, the CEO suggested the urgent need
for training of staff at all levels and in all divisions of the company.
Q. 1 Which in your opinion is the most lucrative sales promotion
options for increasing sales? The top management was
interested in knowing the complete financial implications of
each of the options suggested and then you are required to
develop a comprehensive marketing plan. You will have to
choose at least one option.

Ans.
The Marketing Plans Adopted Are

The company could explore selling its washing machines on discount. The
company had recently reduced the price and the existing price after reduction was
Rs10000per unit, but still the company did not experience any significant impact
on sales. So instead of that the marketing team proposed a plan of providing
discounts up to 12%.

The company explored the possibility of introducing exchange sales scheme. The
marketing team had done some analysis of the number of machines and their
average years of useful life in selected regions where the exchange schemes had
been successful. Most of the households did not have the new feature which the
company’s product offered. The marketing team gave an estimate of selling about
140000 units in the next one year, provided the scheme offered, off-setting Rs
3000 to Rs 4000 of the price to customers who purchase company’s product in
exchange for their existing machines.

The third option, which the marketing team proposed, was aimed to bring all-
round reductions in the inventory levels. The marketing division of the company
explored the possibility of selling the goods to its customers under a scheme
which would deliver the machine after 1 and ½ months of placing the order. As
per the terms and conditions of the scheme, the customer, through this scheme,
would get a benefit of Rs 1500 for this waiting period. And the tests showed that a
section of customers would not mind waiting for the time period, which could
result in additional 2000 machines being sold per month.

In order to ensure that the company did not loose on sales due to technological
advancements, the marketing team proposed that customer would be given a
choice to replace their machines after every three years by paying the sum of Rs
6000 any time after the third year.

Another strategy adopted by marketing team was over stocking of raw materials
that was in case of foreign exchange fluctuations. About 45 % of the total raw
material consisted of imports. The company had the policy of overstocking raw
materials to the extent of 25 % of requirements. So the director of finance
estimated that an average about 20% of raw material to be stored to buffer
foreign exchange fluctuations and this would help the company to gain an average
20 to 25 % of this investment per annum.

Strategy I Would Prefer

In my opinion, the second strategy adopted by the company is the most lucrative
one. This is because due to recession in the market people are not buying washing
machines as they see it like a luxury. But with the advancement in the technology
the people who already have one can change it by exchanging it with the scheme.
They can also save up to Rs 3000 to Rs 4000 which I feel is a good bargain for an
old electronic product. This way the consumer is at a profit as he can get the
latest technology at cheap price and the company can also sell washing machines
and earn maximum profits.
Q.2 You are required to prepare a Cash Budget in respect of 6
months from July to December from the information given in the
table in the case to enable management to plan for financial
requirements. Your report must include recommendation for cost
reduction from the data.

*All figures in Lakh

PARTICULARS JULY AUGUST SEPTEMBER OBTOBER NOVEMBER DECEMBER
Opening balance 150 62236500 94073000 138609500 161196000 180762500

Add:
Cash sales 200 200 200 200 200 200
Collection from
Debtors
96670000 96670000 96670000 96670000 96670000 96670000

Dividend
Received 30000

TOTAL (A) 131670000 178906500 210743000 255279500 277896000 297432500

Less:

Plant & 40
Machinery

R&D 2 2 2 2 2
(Advertising)

Hire Purchase 4 4 4 4 4 4

Income Tax 100 20

Preference 40 40
share Paid

10% ordinary
Share

Wages 80 80 56 54 58 60

Overhead 101 89 105 104 111.5 112.5

Payment to
Suppliers 400 600 400 600 700 800

R&D 9 11 12 12.5 12.5 15

Distribution 12 14 14 16 15 16

Commission @
5% 4833500 4833600 4833500 4833500 4833500 4833500

TOTAL (B) 62236500 84833500 72133500 94083500 97133500 105783500

Q.3 Is JIT a viable option for WRL? Your report must include a
several PowerPoint presentation for and against JIT with specific
reference to WRL?

Ans. JIT: Just In Time is an integrated set of activities designed to achieve high
volume production using minimal inventory is of raw materials, work in progress
and finished goods. Parts arrive at the next work station “just in time” and are
completed and moved through the operations quickly. JIT is also based on the
logic that nothing will be produced until it is needed.

FOR

• JIT concept employed trained employees organization of resources into self

contained work cells, reduced inventory, quick change of equipment, high
level of maintenance and housekeeping and delivery schedule closely
synchronized to demand.

• JIT when introduced in the organization will help the company to be tension
free as the company can lay emphasis were they need to make or pay more
attention in a particular section.

• By using JIT the company will have technical approach in production and
WRL will benefit it from the workers. Through repetitive production done by
the workers of WRL, the time would be saved.

• By using JIT the company will eliminate waste and would ensure proper
utilization of equipment, workers time. WRL will need all this in their
manufacturing process and it will help the company to reduce cycle time,
improve quality, flexibility and various costs. In this way, WRL would be
benefitted by using JIT.

AGAINST

• In WRL the option was to cut down production for the next year but this will
lead to loss to the company as new technology would come up. We need to
update with that and it was difficult for the company as they have entered
into an agreement with its suppliers for raw materials and any changes in
production or purchase plan for next year would result in paying
compensation to its suppliers for not following the contract.

• JIT inventory means how much is needed at what time but in WRL the
distributors are paid on time and as per the accounting department
specification, account receivable and cash requirement of the company
about 12% of sales were as account payable contributed to 15% of sales and
 this resulted in a negative effect on WRL and more inventory and capital was
blocked.

• JIT will not benefit WRL as most operations are highly mechanized and a cut
down in production would result in idle time and WRL was planning to
manufacture new models. But it immediate problem was to reduce the
existing stock and bring out new models in the market would mean
substantial efforts in promoting and selling in the near future.

- Culture Differences: The organizational cultures vary from firm to firm. There
are some cultures that tie to JIT success but it is difficult for an organization to
change its cultures within a short time.

- Traditional Approach: The traditional approach in manufacturing is to store up

a large amount of inventory in the means of backing up during bad time. Those
companies rely on safety stocks may have a problem with the use of JIT.

- Difference in implementation of JIT: As JIT was originally established in

Japanese, it is somehow different for implementing in western countries. The
benefits may vary.

- Loss of individual autonomy this is mainly due to the shorter cycle time which
adds pressures and stress on the workers.

- Loss of team autonomy this is the result of decreasing buffer inventories which
lead to a lower flexibility of the workers to solve problem individually.

- Loss of method autonomy it means the workers must act some way when
problems occur, this does not allow them to have their own method to solve a
problem.

- JIT success is varied from industry to industry some industries are benefit more
from JIT while others do not.

- Resistance to change JIT involves a change throughout the whole organization,

but human nature resists changing. The most common resistance is emotional
resistance and rational resistance. Emotional resistance are those psychological
feeling which hinder performance such as anxiety. Rational resistance is the
deficient of the needed information for the workers to perform the job well.

- Relationship between management and employees is important A mutual trust

must be built between management and employees in order to have effective
decision making.
- Employee commitment Employees must commit to JIT, to enhance the quality as
their ultimate goal, and to see JIT as a way to compete rather than method used
by managers to increase their workload.

- Production level JIT works best for medium to high range of production volume.

- Employee skill JIT requires workers to be multi-skilled and flexible to change.

- Compensation should be set on time based wages. This allows the workers to
concentrate on building what the customers wants.
Q.4 Discuss the applications, role and implementation of new
technologies like EDI, Bar Code and RFID to achieve an efficient
procurement and distribution system for WRL. Your report
must be specific to WRL.

Ans.

WRL has coded the complete details of each store and various routes covered
within each day. These details include the name of the store, its address, and its
turn over locality population statistic of the area in which the store is located. The
sales person is expected to visit each store to fulfill the pending orders and to
collect the new orders. Company has used the latest technology available in the
market to identify its goods and to differentiate each product. They have adopted
the EDI (Electronic Data Interchange) in which data of one company can be
exchanged with another company keeping in mind the rules and regulations. Bar
Code is the code which company marks on their product so that no duplicate
product can be manufactured which is better for the consumer. On the other hand
its benefits are that the sellers from diffusive and other brand have same
instructions on them. It has a number of lines which are not known to people but
the machine can identify the product and tells the sellers to get the price. In
maintenance of stock RFID (Rapid Frequency Integrated Device) it is the
frequency which is added to the product before keeping it in stores. This device is
mainly found in big bazaar, pantaloons etc because there are lots of items which
cannot be detected and found out. But through this device we can find out where
it is. Thus this helps the company what is coming in and what is going out of the
stores and there can be no theft of any products.

This software is to manage its orders and the invoicing process. The system was
installed at the head office. The software is a menu driven one, which allows the
user to capture the order and invoice details. The salesman visits the shops and
collects the orders in a standard format, which are processed by the computer
department of the company under the order processing system.

The company sells most of the goods against credit or post dated Cheque
payment. The salesmen returns the issue slip, duly acknowledged by the shop
owner with a Cheque or cash and material receipt acknowledgement to the
accounts department for further processing. The issue slip plays the role of
withdrawal, delivery and billing.

The data that is captured by the order processing system includes:

• Division
• Region Code
• Salesmen Details
• Distributorship
• Product Details
• Invoice Value
• Cost
• Gross Profit
The orders are processed by the computer system. Order processing systems
generate issue slips (in duplicate) after checking the inventory levels. The systems
manage after checking the inventory levels. The system also helps in updating the
inventory. After delivering the products as per the shop order, acknowledgement
is obtained from the shopkeeper and it is used for the billing and accounting
purpose by the system. The data captured through the slip includes:

• Shop Code
• Shop Name
• Order No.
• Route No.
• Issue Slip No.
• Product Details
• Ordered Quantity
• Issued Quantity
• Amount
• Date

These are system which helps WRL in distribution of their product, checking the
inventory, providing help in accounts, and to see that whether product has
reached to the final destination or not.
Q.5 Prepare a task description and training need analysis for a
typical sales officer WRL who visits distributors and is responsible
for achieving sales targets.

Ans.

Task Description for Sales Officer WRL is:

• Ensuring achievement of sales target
• Ensuring extensive coverage by traveling in the allotted area
• Personally visiting the market and handling distributor & retail network
• Handling distributor distribution arrangement in every way

The Sales Officer is responsible for business development and pushes

the existing business by:
• Identifying potential clients
• Developing contacts & generating business from Corporate Clients
• Maintaining Business Relations
• Client servicing & increase in business with existing customers

Typical Job Description of a Business Sales Officer is:

• A sales officer should organize, motivate and lead sales teams in a wide
range of sectors, including pharmaceuticals, fast moving consumer goods
(FMCGs) and finance.
• They are responsible for the combined performance of the team and for
ensuring that everyone within their team reaches their targets.
• They may set the targets themselves or receive them from the sales
director. They may also operate incentive schemes that motivate members
of their team to reach or exceed sales targets.
• Whilst management structures vary significantly between companies and
sectors, most sales managers will be responsible for specific geographical
areas (area sales managers) and/or particular products, or types of
customer.