Question Write a summary above including their concept detai

Question:

Write a summary above including their concept details, process design and management and competitive priorities.

ONTARIO PACKAGING It looks to me that we are agreed. The process investment proposals before us are sound in princi- ple, providing we can increase throughput from present levels by some 40 percent, as indicated in the supporting details. I know this is no easy task, but all market segments are getting more diffi cult, and if we are to survive and maintain current performance levels, then this type of challenge will be illustrative of many future corporate decisions. From these initial discussions it appears that the extra volume is available, even though it places a greater emphasis on price. The new process will help, in part, to reduce costs, but higher volumes are essential if we are to maintain the group\'s payback requirements and protect the above-average return on investment performance we have achieved in the past. Norm Phillips, chief executive officer of Ontario Packaging, was summing up a meeting on manufacturing investment proposals, which was intended to be the initial phase of a mod ernization program within the company Background Ontario Packaging is part of Texet Industries, a large group of companies with diverse in terests in food, cosmetics, engineering, and toys, besides a growing stake in retail holdings and other nonmanufacturing businesses. Taken over in the late 1980s, Ontario Packaging is now one of several packaging companies within the group but the first within the province. Having given the company time to settle down within the new corporate structure and allowed Norm Phillips to gain an understanding of the business since his transfer from within the group, some 12 months before, the executive group of Texet had recently asked the company to review its position. The review was to include an assessment of its current investment proposals it thought to be necessary, with an indication of why they should take place, and the anticipated impact on the busi ness as a whole and on the various return-on-investment measures used within the group, markets and to include any future process in particular. Manufacturing Ontario Packaging produces a fairly wide range of cartons and other forms of packaging Its manufacturing capability comprises various forms of printing, laminating, cutting, creasing, gluing, and other auxiliary processes, together with a whole range of in-house support functions. The investment proposals under review concern replacing current laminating equipment with an up-to-date process that would provide the same capability (see Exhibit I). The car tons that use this process account for some 30 percent of total production volumes (stan- dard machine hours). At a cost of $2.5 million, the investment would give labor, material, and other savings to provide a payback of 6.5 years on current volumes. However, meeting the Texet investment payback norm of four years would necessitate increasing current sales

Solution

Ontario packaging has been high-quality products for its customers packaging needs.

The company has calculated the payback period for the new investment to be 6.5 years, higher than the expected 4 years for the group companies. This calculation is also based on capacity utilisation off 80-85 percentage, where as the existing capacity utilisation itself is only around 60%. Sales for the company need to go up by 40%, to compensate for the investment proposed.

SWOT and PESTLE Analysis needs to be carried out to have a comprehensive understanding of this carton packaging product. Prices might have to be lowered to increase the sales which in turn will lower the profit margins.

Ontario packaging needs to improve not only its existing market share from its competitors, but also needs to explore new markets to achieve the incremental sales targets.

The new process needs to ensure that the high quality and features of the product are kept intact while making the additional volumes of cartons.

As per the marketing survey conducted, prompt quotations and samples, high reliability on delivery of products and flexibility in incorporating changes are the main advantages which the clients look for.

The process investment of $2.5 Million should be ensured that it is able to meet aforementioned criteria rigorously, even at high volume levels.

This type of cartons account for 30% of total packaging volumes for the company, therefore utmost care should be taken to arrive at any decision because any wrong decision can significantly harm the company financials adversely.

The company should gather more data, and conduct more market surveys or hire industry consultants to concretely conclude that they will be able to achieve incremental 40% sales. It should lay down a clear path and sales strategy as to how will it go about achieving it.