Brand Pipe Company

Group 2 (Section B):

Bunny Sethi Faizan Syed Vikrant Singh Sharique Ali Geetansh Lal Ravi Kumar Bable Garga Majumdar Arjun Nair

Brand Pipe Company

Brand pipe is a plastic extruder company, serving Pacific Northwest It is the second largest company of the region States served by Brand Pipe: Oregon, Washington, Idaho, and Northern California Products Portfolio : Poly, PVC, ABS, and Styrene Major Competitors : Sierra Plastics, Brand Pipes, and Tamarack Pipes Promotion and Sales: Limited amount spend on advertising, believed in personal selling The salespeople were assigned by three geographic areas, namely: Seattle-Puget, Portland & eastern Oregon-eastern Washington area & the southern Oregon-northern California area Distribution: Sold majority of its pipe through distributors Distributors margin:5-10%

The Problem
The Brand pipe division of the company was making losses on account of which Mr. Buford (GM) was told to come up with a
Specific marketing strategy & plan to stop the losses. Provide a base for continued growth

The loss can be attributed to various reasons such as :

Increase in competition in every sector to which it catered to, thus eroding the average price/lb. Heavy dependency on the distributors who were not the exclusive ones, thus a lot depended on them Inefficiencies in the process (both due to material wastage and machine changeover) Lack of focus on segments

Product wise Analysis

Product
Direct Margin Share of revenue(%) Profit(per pound basis)

Poly
-0.0135 7.98 -0.0532

PVC
0.0392 61.75 0.0017

ABS
-0.0122 15.3 -0.0623

Styrene
0.0275 14.9 -0.0039

PVC is the single product which has been generating profit for the company Only PVC & Styrene have positive contribution margin PVC contributes to major portion of revenue

Effect of reduced wastage

Poly
Gross sales price Less discounts, freight and allowances Net sales price Less Variable costs (raw materials and conversion) Direct margin (contribution to fixed costs) Less fixed costs Profit 163125.000 31950.000 131175.000 137250.000 -6075.000 17865.000 -23940.000

PVC
1068396.000 53419.800 1014976.200 863233.000 151743.200 145162.500 6580.700

ABS
280531.200 29068.200 251463.000 260844.800 -9381.800 38526.900 -47908.700

Styrene
285038.400 38906.400 246132.000 217752.000 28380.000 32404.800 -4024.800

Poly
Gross sales price Less discounts, freight and allowances Net sales price Less Variable costs (raw materials and conversion) Less Variable costs(when 7% wastage is eliminated) Direct margin (contribution to fixed costs) Less fixed costs Profit 163125.000 31950.000 131175.000 137250.000 127642.5 3532.500 17865.000 -14332.500

PVC
1068396.000 53419.800 1014976.200 863233.000 802806.69 212169.510 145162.500 67007.010

ABS
280531.200 29068.200 251463.000 260844.800 242585.66 8877.336 38526.900 -29649.564

Styrene
285038.400 38906.400 246132.000 217752.000 202509.36 43622.640 32404.800 11217.840

Cost of machine changeover

Total revenue =$ 18,00,000 Cost of changeover / day - $ 175 Total cost of changeover (annual)* = $ 50,400 Annual loss due to changeover (% of revenue) = 2.8%
*Assumption that the plant operates 6 days a week

Reasons for changeover: Tight limit on finished inventory goods Rush orders

Market Segment Decision:

Market Segment Plastic Type Used Market Size(Washington, Regional) millions pounds 8.25,16.5 0.145,0.350 0.13,1.4 2,5 0.6,1 3,5.9 1,1.75 0.465,1 1.4,2.8 0.123,0.3 Five year growth rate(Washington, Regional) 17%,17% 0%,0% 75%,90% 100%,100% 45%,45% 66%,57% 27%,35% 50%,50% 90%,78% 0.00% 0.00% Decision

Agricultural Irrigation Private potable water system market Mobile Home market Public potable water Industrial market Turf Irrigation market Drain waste and vent market Conduit Sewer and Outside drain Gas Transportation market Water well service and stock water

PVC PVC/Poly/ABS ABS PVC PVC/Poly PVC ABS - 90% PVC - 10% PVC/Poly Styrene/PVC PVC/Poly/ABS PVC/Poly

Yes No No Yes No Yes No Yes Yes No NO

Recommendations:
Move out of Poly and ABS Focus on following markets: Agricultural irrigations, Public potable water, Turf Irrigation market, Conduits, and Sever and outside drain Stop taking rush orders or charge a premium to cover the changeovers Concentrate on solving the problem of inefficiency ( more plastic used) Segment the sales force product wise rather than on geographical basis A part of compensation of sales force should be variable depending upon the sale that they generate

Thanks You!!