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Transcript of Aayaam II Group4
AAYAAM DURABLES LTD.
SCENARIO - II
By:
Hemant Kumar (232008)
Juli Gupta (232009)
2
Introduction Aayaam Durables Ltd is a public company
in consumer durable sector. In brown goods, ADL sells LED/LCD in flat
Panel Display category. In white goods, it sells refrigerators (both
Frost free and Direct Cool Categories) and washing machines (Top loading and Semi-automatic categories)
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Organization ChartCEO
Vice President (HR)
Head (Corporate HR)
Head (Sales HR)
Vice President (Customer Service)
CFO Vice President (S&M)
Head Marketing Head Sales
Regional Manager North
Regional Manager South
Regional Manager East
Regional Manager West
Head FPD Head Refrigerator
Head Washing Machine
Vice President (R&D
Electronics)
Vice President (R&D
Appliances)
4
Problem areas
Facing tough competition from global brands.
Both top line and bottom line shrinking for all revenue generating products.
Unable to invest in R&D and marketing Lower brand recall value High inventory carrying costs Over-manned in some areas
5
ArgumentsProduct Team only a testing team and not working on any new models
VP (S&M) losing market share because of lack of new models. Negligible investments in marketing resulting in low brand recall Unhappy with Customer Service network.
CFO 20% schemes to network on higher side Wanted more investments in accounting systems but opposed
by VP (HR)
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Arguments Contd.VP (R&D) Engineers demotivated due to lack of investments in new
technology
VP (Supply chain) Wants more investments in software systems and
warehouses to reduce inventory carrying costs
CEO ADL top heavy and over-manned.
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Scenario - II
It was felt that the industry will grow in 2015 by 15% over 2014. As penetration level in the industry was low in India and there might be global stagnation in economy.
In the circumstances, it was felt that revenue growth for ADL was important. The strategic objective decided was to achieve revenue of Rs. 900 crores in 2015 and improve the profit by -5.5% to -2.5%
To achieve the strategic objectives, it was decided to reduce the manpower cost by 5% (of 2014 revenue level)
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ADL Turnover and Profitability
Revenue in Cr Growth in % Profit in Cr Profit in %
2012 800 - -8 -1
2013 882 10.00% -44.1 -5
2014 842 -4.70% -46.31 -5.5
2015 900 6.89% -22.5 -2.5
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Manpower cost for 2014Band No. of employees Avg. CTC Total cost
4 12 1,20,00,000 14,40,00,000
3 83 75,00,000 62,25,00,000
2 158 35,00,000 55,30,00,000
1 327 15,00,000 49,05,00,000
Total 181,00,00,000
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Objective
Manpower cost to be reduced by 5% of 2014 revenue
Cost reduction = 5% of 842 cr
= 42cr
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Solution
• Attrition of employees
• Layoff due to underperformance
• Reduction in hiring
• Reduction in the % of salary increase
• Increased manpower in R & D Department
• Increased manpower in sales Department
12
Savings due to attrition
Band Attrition rate
Total no. of employees
No. of employees
leaving
Average CTC Costs saved
4 10% 12 1 1,20,00,000 1,20,00,000
3 10% 83 8 75,00,000 6,00,00,000
2 15% 158 24 35,00,000 8,40,00,000
1 25% 327 82 15,00,000 12,30,00,000
Total 29,90,00,000
13
Firing of 2% under-performers
Band Total no. of employees
No. of employees fired
Avg. CTC Costs saved
4 12 0 1,20,00,000 0
3 83 2 75,00,000 1,50,00,000
2 158 3 35,00,000 1,05,00,000
1 327 7 15,00,000 1,05,00,000
Total 3,60,00,000
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Prune manpower from low productive areas
Band S&M
Marketing Corp
Sales Corp Regional sales
FPD Refrigerator Washing machine
4 2 1 - - - -
3 4(-1)= 3 4(-1)=3 4 2 2 2
2 - 3 15 4(-2)=2 3(-1)=2 2(-1)=1
1 1 1 146(-5)=141 2 2(-1)=1 1
15
Prune manpower from low productive areas
Band HR CFO
Corp General Affairs
Regional Corp Regional
4 1 - - 2 -
3 3(-1)=2 3 5(-1)=4 10(-2)=8 4
2 1 10(-4)=6 5(-1)=4 15(-4)=11 15(-3)=12
1 - 2 - 29(-3)=26 -
16
Prune manpower from low productive areas
Band Customer Services Supply Chain R&D
Corp Region Corp Region Electronics Appliances
4 1 - 1 - 1 1
3 4(-1)=3 19(-2)=17 3 4 3 5
2 3 26 3 - 21 31
1 - 105 - 19 10 8
17
Savings due to pruning
Band No. of employees Avg. CTC of employees pruned
Cost
4 0 1,20,00,000 0
3 9 110,00,000 9,90,00,000
2 16 45,00,000 7,85,00,000
1 9 20,00,000 1,80,00,000
Total 30 20,10,00,000
18
No. of employees remaining
Band Initial employee
count
Less(Attrition)
Less(Layoff of
under-performers)
Less (Pruning from non
productive and over-manned areas)
Final employee
count
4 12 1 0 0 11
3 83 8 2 9 64
2 158 24 3 16 114
1 327 82 7 9 219
19
Appraisal costs
Band Avg. appraisal
rate
No. of present
employees
Avg. CTC Salary before appraisal
Appraised amount
4 2% 11 1,20,00,000 13,20,00,000 13,46,40,000
3 5% 64 75,00,000 48,00,00,000 50,40,00,000
2 8% 114 35,00,000 39,90,00,000 43,09,55,000
1 8% 229 15,00,000 34,35,00,000 36,75,45,000
Total 135,20,00,000 143,18,40,000
Increase in salaries = 6,98,40,000
20
Hiring to compensate for attrition
Band S&M R&D Min. CTC offered Cost incurred
4 - - 1,00,00,000
3 - - 40,00,000
2 3 4 20,00,000 3,50,00,000
1 12 8 5,00,000 5,00,00,000
Total 8,50,00,000
21
Manpower cost
Savings:
Costs:
Total Savings = Savings – Costs
= 52,60,00,000 - 14,48,40,000
= 38,11,60,000
Due to attrition 29,90,00,000
Layoff of 2% under-performers 3,60,00,000
Layoff from pruning non-productive areas 19,10,00,000
Total 52,60,00,000
Annual appraisal 6,98,40,000
New hiring 8,50,00,000
Total 14,48,40,000
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THANK YOU!!