sun after storm
DESCRIPTION
Sun after storm. A Case Study on Even’ Star Organic Farm. Dream Chasers From Sun Yat-sen University. ZHANG Wei HUANG Peilong PENG Weijian LIU Mengning. Introduction. Brett. Manager of Even’ Star. Members of IMA. Outline. A. Case Overview. A1 Storm before Sun. B1 A STORM Framework. - PowerPoint PPT PresentationTRANSCRIPT
Sun after stormA Case Study on Even’ Star Organic Farm
Dream ChasersFrom Sun Yat-sen University
ZHANG WeiHUANG PeilongPENG WeijianLIU Mengning
Introduction
Members of IMAMembers of IMA
Manager of Even’ StarManager of Even’ StarBrett
Outline
Goal: To help Even’ Star Organic Farm maximize profits in the long run.Goal: To help Even’ Star Organic Farm maximize profits in the long run.
A. Case OverviewA. Case Overview
• B1 A STORM Framework• B1 A STORM FrameworkB. Current Situation AnalysisB. Current Situation Analysis
D. Strategy PositioningD. Strategy Positioning
E. Utilization & ImplementationE. Utilization & Implementation
F. uNcertaintyF. uNcertainty
• A1 Storm before Sun• A1 Storm before Sun
• C1 Quantitative Method• C1 Quantitative Method
• C2 Qualitative Method• C2 Qualitative Method
• C1 A Differentiation Strategy• C1 A Differentiation Strategy
C. Apportion AnalysisC. Apportion Analysis
• E1 Short-Term Decision• E1 Short-Term Decision
• E2 Mid-Term Planning• E2 Mid-Term Planning
• E3 Long-Term Strategy• E3 Long-Term Strategy
• F1 Weather Conditions• F1 Weather Conditions
• F2 Petrol Price Increase• F2 Petrol Price Increase
A1 Case overview
Strategy Analysis
Utilization &Implementation
uNcertainty
Strategy Analysis
Utilization &Implementation
uNcertainty
Social Conditions
Technical Conditions
Organizational Conditions
Revenue Conditions
Market Conditions
Social Conditions
Technical Conditions
Organizational Conditions
Revenue Conditions
Market Conditions
A STORM Framework Analysis
A STORM Framework Analysis
A SUN Solution A SUN Solution
Current Situation
Strategy Analysis
Case Overview
Utilization & Implementation uNcertaintyApportion
Analysis
Apportion Analysis
Industry Retrospect: Growing Consumption of Organic Products
Huge Gap between Supply and Demand:
B1 Social Conditions
Strategy Analysis
CurrentSituation
Case Overview
Organic Product has a blooming futureOrganic Product has a blooming future
Introductory Growth Maturity
Organic Farming
Total Market Sales
Decline
Utilization & Implementation
ApportionAnalysis
uNcertaintySTORM
FrameworkSTORM
Framework
Covered with black plastic$ 133 per acre
Stored in containers
Irrigation$ 50 per acre
In the greenhouse$ 1 per seed
$ 700 per acre
B2 Technical Conditions – Planting Procedure
SeedsSeeds
SeedlingsSeedlingsContainersContainers
ProduceProduce
1
2
3
4
Yield is seriously infected by weather conditionsYield is seriously infected by weather conditions
Strategy Analysis
CurrentSituation
Case Overview
Utilization & Implementation
ApportionAnalysis
uNcertaintySTORM
FrameworkSTORM
Framework
180 miles
70 miles
220 miles
6 hours
2 hours
8 hours
Distance Time
B2 Technical Conditions – Transportation
Transportation of Product Truck $ 7000 Variable Cost: $ 0.13+ $ 0.21= $ 0.34 per Mile Depreciation of Truck $7,000
for100,000 Miles$7,000for100,000 Miles
Strategy Analysis
CurrentSituation
Case Overview
Utilization & Implementation
ApportionAnalysis
uNcertaintySTORM
FrameworkSTORM
Framework
Restaurant is the most time and distance consumingRestaurant is the most time and distance consuming
B3 Organizational Conditions
Planting Work
Transporta- tion Work
Packing Work
BrettBrett
BrettBrett
BrettBrett Part-time LaborersPart-time Laborers
$ 10 per person$ 44 per week
3 days per week
4 days per week
Brett works almost everyday without rest.Brett works almost everyday without rest.
Strategy Analysis
CurrentSituation
Case Overview
Utilization & Implementation
ApportionAnalysis
uNcertaintySTORM
FrameworkSTORM
Framework
50 +Every week
B4 Market Conditions
Selling Price HighLow
Community-SupportedAgriculture Community-SupportedAgriculture
Farmer’s MarketFarmer’s Market
RestaurantsRestaurants
Upscale restaurantsFixed product catalogue every week
High risk/high return10% spoilage rate
Restaurant CSA Farmer’s Market
CSA is getting popular in the USCSA is getting popular in the US
Advantages for farmers:1.Get to spend time marketing the food early in the year2.Receive payment early in the season, which helps with the farm's cash flow3.Have an opportunity to get to know the people who eat the food they grow
Strategy Analysis
CurrentSituation
Case Overview
Utilization & Implementation
ApportionAnalysis
uNcertaintySTORM
FrameworkSTORM
Framework
B5 Revenue Conditions – Channels
Strategy Analysis
CurrentSituation
Case Overview
Utilization & Implementation
ApportionAnalysis
uNcertaintySTORM
FrameworkSTORM
Framework
Restaurant
CSA
Farmer’sMarket
Restaurants make up 56% of the revenue
Restaurants have the highest margin per week
Restaurants have the highest margin and revenue per week.Restaurants have the highest margin and revenue per week.
B5 Revenue Conditions – Channels
Strategy Analysis
CurrentSituation
Case Overview
Utilization & Implementation
ApportionAnalysis
uNcertaintySTORM
FrameworkSTORM
Framework
Rate of Return (Revenue/ Variable cost)
Time is most effectively used in Restaurants
CSA shares the highest rate of return.
More time of CRM can be spent in the restaurant channel and the CSA has the highest potential of Profitability.
More time of CRM can be spent in the restaurant channel and the CSA has the highest potential of Profitability.
B5 Revenue Conditions – Produce
Strategy Analysis
CurrentSituation
Case Overview
Utilization & Implementation
ApportionAnalysis
uNcertaintySTORM
FrameworkSTORM
Framework
Farmer’s Market
Profit structure of each Breed
CSA Restaurants
Yield
Tomatoes’ output has far exceeded the others and its elasticity of demand is relatively little. Tomatoes’ output has far exceeded the others and its elasticity of demand is relatively little.
Social Conditions
Technical Conditions
Organizational Conditions
Revenue Conditions
Market Conditions
Social Conditions
Technical Conditions
Organizational Conditions
Revenue Conditions
Market Conditions
STORM ConditionsSTORM Conditions
Strategy Analysis
Apportion Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertainty
Apportion Analysis
Strategy Analysis
Apportion Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertainty
Classify Relevant Cost and Non-relevant Costs
Cost of seed &seedlingFertilizer costPlant, care &harvestPackagingFuelMaintenance &repairDepreciation of tangible assetsCommunication cost
Cost of seed &seedlingFertilizer costPlant, care &harvestPackaging
Cost of seed &seedlingFertilizer costPlant, care &harvest
FuelMaintenance & repairDepreciation of tangible assetsCommunication cost
FuelMaintenance & repairDepreciation of tangible assetsPreparation for the truck
Relevant Cost
Non-relevant Cost
The Restaurant Channel
The CSA Channel
The Farmers’ Market Channel
We should focus on the relevant costWe should focus on the relevant cost
Strategy Analysis
Apportion Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertainty
Caselot for CSA
Items Percentage of Last Season
Percentage of This Season
Tomatoes (large) 12.50% 12.50%Tomatoes (small) 8.25% 14.12%
Watermelon 10.00% 5.00%Okra 5.00% 9.00%Basil 5.00% 7.00%
Cucumbers 16.67% 5.00%Sweet potatoes 10.00% 11.00%Winter squash 18.75% 21.68%
Foundation of Adjustment:1.Different profit margin of different crops2.Variability and Abundance3.Long term CRM (Focus on CSA)
C1. Quantitative Analysis – Linear Programming
Tomatoes (large)
Watermelon
Basil
The Restaurant Channel
Tomatoes (small)
Cucumber
Sweet potatoes
Winter squash
Okra
The CAS Channel The Farmers’ Market Channel
▪ 2.175X
▪ 3.5X
▪ 0.4X
▪ 0.15X
▪ 0.2X
▪ 0.9X
▪ 0.33X
▪ 0.225X
▪ 0.125Y
▪ 0.141Y
▪ 0.05Y
▪ 0.094Y
▪ 0.07Y
▪ 0.15Y
▪ 0.11Y
▪ 0.22Y
▪ 31-(2.175X+0.125Y)
▪ 45-(3.5X+0.141Y)
▪ 13.33-(0.4X+0.05Y)
▪ 5.6-(0.15X+0.094Y)
▪ 4.8-(0.2X+0.07Y)
▪ 22.33-(0.9X+0.15Y)
▪ 7.11-(0.33X+0.11Y)
▪ 8.88-(0.225X+0.22Y)
Step One List all the constrained conditions & objective functionStep One List all the constrained conditions & objective functionStep One List all the constrained conditions & objective functionStep One List all the constrained conditions & objective function
Strategy Analysis
Apportion Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertainty
Constrained ConditionConstrained Condition
0 ≤ 130.06-(7.883X+0.8617Y) ≤ 40
0≤5+1.183X+0.6208Y≤24
1. Constrained by products1. Constrained by products
2. Constrained by working hours2. Constrained by working hours
3. Constrained by truck capacity3. Constrained by truck capacity
Objective FunctionObjective Function
0 ≤ 31-(2.175X+0.125Y) ≤310 ≤ 45-(3.5X+0.141Y) ≤ 450 ≤ 13.33-(0.4X+0.05Y) ≤ 13.33
0 ≤ 5.6-(0.15X+0.094Y) ≤ 5.60 ≤ 4.8-(0.2X+0.07Y) ≤ 4.80 ≤ 22.33-(0.9X+0.15Y) ≤ 22.330 ≤ 7.11-(0.33X+0.11Y) ≤ 7.110 ≤ 8.88-(0.225X+0.22Y) ≤ 8.88
Quantitative Analysis – Linear Programming
Z=3081.47-32.918X-0.62601Y
Step One List all the constrained conditions & objective functionStep One List all the constrained conditions & objective functionStep One List all the constrained conditions & objective functionStep One List all the constrained conditions & objective function
Strategy Analysis
Apportion Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertainty
Step Two Feasible Region within the restrained conditions Step Two Feasible Region within the restrained conditions
Quantitative Analysis – Linear Programming
Strategy Analysis
Apportion Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertainty
( 8.98 , 31.63)
Quantitative Analysis – Linear Programming
Step Three Optimal solution of linear programmingStep Three Optimal solution of linear programming
Because of integer programmingOptimal solution: Quantity of Restaurants served: X=9 Quantity of CSA subscribers: Y=32Maximized relevant profits per week: Z=3081.47-32.918×9-0.62601×32 ≈$ 2764.18
Strategy Analysis
Apportion Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertainty
Quantitative Analysis – Planned Sales Structure
Cases
Tomatoes (large) 19.58
Tomatoes (small) 31.50
Watermelon 3.60
Okra 1.35
Basil 1.80
Cucumbers 8.10
Sweet potatoes 3.00
Winter squash 2.03
The Restaurant Channel
The Restaurant Channel
The CSA ChannelThe CSA Channel
The Farmers' Market Channel
The Farmers' Market Channel
Average Weekly Restaurant Delivery Composition(Total for 9 Customers)
Average Make-up of a Single CSA “Box”(Total for 32 Subscribers)
Average Weekly Sales
Approximate % of a Standard Harvest Case
Tomatoes (large) 12.50%
Tomatoes (small) 14.12%
Watermelon 5%
Okra 9%
Basil 7%
Cucumbers 5.00%
Sweet potatoes 11%
Winter squash 21.68%
Cases
Tomatoes (large) 7.43
Tomatoes (small) 8.98
Watermelon 8.13
Okra 1.24
Basil 0.76
Cucumbers 12.63
Sweet potatoes 0.44
Winter squash 0
Strategy Analysis
Apportion Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertainty
9 3 2
Qualitative Analysis
Strategy Analysis
Apportion Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertainty
Solvency
Significant debtSignificant debt Time of Cash-in FlowTime of Cash-in Flow
Restaurant Channel: CSA Channel: Receive $400 from each subscriber at the beginning of the 15-week season.Farmers’ Market Channel: Cash sale
To buy and build the farm, Brett spent a lot from saving and assumed significant debt.
Increase the sales of CSA channel and Farmers’ market while decrease the sales of restaurant channel.
Increase the sales of CSA channel and Farmers’ market while decrease the sales of restaurant channel.
To improve the cash flow performanceTo improve the cash flow performance
Opportunity Cost
Brett hope the farm would become profitable enough to support them both comfortably in the near future.
Brett hope the farm would become profitable enough to support them both comfortably in the near future.
ChannelTime consumed
(hours per week)
The restaurants 14.83
CSA 8.9
Farmer markets 27
In total 50.73
Qualitative Analysis
Strategy Analysis
Apportion Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertainty
Personal SatisfactionPersonal Satisfaction
Proper working hours and schedule should be made.e.g. working hours≤ 48h per week
Proper working hours and schedule should be made.e.g. working hours≤ 48h per week
Qualitative Analysis
Trend of Different Channels
The restaurant channel: additional 10 potential restaurants in the coming season
The restaurant channel: additional 10 potential restaurants in the coming season
Strategy Analysis
Apportion Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertainty
The CSA channel: 33 to 90 potential subscribers growth rate of 220% of CSA channel in general
The CSA channel: 33 to 90 potential subscribers growth rate of 220% of CSA channel in general
The farmers’ market channel: high risk and high profit with large demandThe farmers’ market channel: high risk and high profit with large demand
Very GoodVery Good
GoodGood
IncreaseIncrease
IncreaseIncrease
Case Overview
Utilization & Implementation
CurrentSituation
uNcertaintyApportionAnalysis
Strategy Analysis
StrategyVISION: to provide high-quality & hi-end organic
productVISION: to provide high-quality & hi-end organic
product
Food with high quality
1.A huge gap in the market 2.A sharp increase in potential customers
A sharp decrease in yield next year
uncertainties in weather and other related factors
S
W
O
T
Internal ExternalDifferentiation Strategy
Strategy Analysis
Case Overview
CurrentSituation
uNcertaintyApportionAnalysis
Utilization & Implementation
Short-term decision – Planned Sales Structure
Cases
Tomatoes (large) 19.58
Tomatoes (small) 31.50
Watermelon 3.60
Okra 1.35
Basil 1.80
Cucumbers 8.10
Sweet potatoes 3.00
Winter squash 2.03
The Restaurant Channel
The Restaurant Channel
The CSA ChannelThe CSA Channel
The Farmers'’ Market ChannelThe Farmers'’
Market Channel
Average Weekly Restaurant Delivery Composition(Total for 9 Customers)
Average Make-up of a Single CSA “Box”(Total for 38 Subscribers)
Average Weekly Sales
Approximate % of a Standard Harvest Case
Tomatoes (large) 12.50%
Tomatoes (small) 14.12%
Watermelon 5%
Okra 9%
Basil 7%
Cucumbers 5.00%
Sweet potatoes 11%
Winter squash 21.68%
Cases
Tomatoes (large) 7.43
Tomatoes (small) 8.98
Watermelon 8.13
Okra 1.24
Basil 0.76
Cucumbers 12.63
Sweet potatoes 0
Winter squash 0
93 8
3 2
Slight adjustment due to strategic concerns.Slight adjustment due to strategic concerns.
The Resturant
Channel
The CSA Channel
Farmers' Market
ChannelTotal
Revenue 2113.99 921.00 1298.82 4333.81
Cost of sales(including packaging) (1233.26) (385.59) (481.84) (2100.69)
Gross profit 880.73 535.41 816.98 2233.12 Less Operating expenses: Depreciation of tangible assets (15.05) (4.90) (20.30) (40.25) Fuel (45.15) (14.70) (60.90) (120.75)
Maintance and repair (27.95) (9.10) (37.70) (74.75)
General and adminstrative expense(communicaiton) (3.69) (0.70) 0.00 (4.39)
Total operating expenses (91.84) (29.40) (118.90) (240.14)Operating profit for week 788.89 506.01 698.08 1992.98
Short-term decision – Forecast Income Statement
Strategy Analysis
Case Overview
CurrentSituation
uNcertaintyApportionAnalysis
Utilization & Implementation
Brett’s Timetable 6:00
-7:00
7:00-
8:00
8:00-
9:00
9:00-
10:00
10:00-
11:00
11:00-
12:00
12:00-
13:00
13:00-
14:00
14:00-
15:00
15:00-
16:00
16:00-
17:00
17:00-
18:00
18:00-
19:00
19:00-
20:00
20:00-
21:00
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Sunday
Farmers’ MarketFarmers’ Market
Farmers’ MarketFarmers’ Market
Leisure DayLeisure Day
PackingPacking
Communication (CSA)
Communication (CSA)
TEL(Restaurant)
TEL(Restaurant)
Transportation (CSA)
Transportation (CSA)
FarmManagement
FarmManagement
FarmManagement
FarmManagement
FarmManagement
FarmManagement
Strategy Analysis
Case Overview
CurrentSituation
uNcertaintyApportionAnalysis
Utilization & Implementation
Save unnecessary time so as to take care of the farm and rest Save unnecessary time so as to take care of the farm and rest
Mid-Term Planning
Sensitivity AnalysisSensitivity Analysis
Variable Value Price Added per Unit Limitation Increment
AllowedDecrement
Allowed
Truck’s Capacity 40 5 40 62.77 12.97
Advice:Purchase a New Truck in 2 yearsEstimated Cost: $10,000Capacity: 30 Cases per TripValue Added: $5×30 × 2= $300 per Week
Strategy Analysis
Case Overview
CurrentSituation
uNcertaintyApportionAnalysis
Utilization & Implementation
Purchase a new truck to enhance capacity.Purchase a new truck to enhance capacity.
Analysis: Transportation to Restaurants per Week:
• Gasoline Cost: $0.21 × 220 = $46.2• Depreciation & Maintenance Costs: ($0.07+&0.13)×220= $ 44• Time Consuming: 3.5 + 0.5 × 10 = 8 (hrs)• Opportunity Cost: $10 × 8 = $80(Based on 10 restaurants and gasoline price stays)
Advice: Outsource the Transportation to Restaurants• Cost Added: $ 150 per week• Profit Added: $46.2+$44+$80-$150 = $20.2 per week
Mid-Term PlanningTransportation OutsourceTransportation Outsource
The numbers of restaurants are increasing .Oil prices are soaring!The numbers of restaurants are increasing .Oil prices are soaring!
Strategy Analysis
Case Overview
CurrentSituation
uNcertaintyApportionAnalysis
Utilization & Implementation
Outsource transportation to restaurants to save time and cost.Outsource transportation to restaurants to save time and cost.
Strategy Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertaintyApportionAnalysis
uNcertainty - Weather Conditions
Worst ConditionWorst ConditionBest ConditionBest Condition Average ConditionAverage Condition
1. Weather1. Weather
Weather: rainyResult: half products unsold ; 50% of unsold spoiled.
Weather: normalResult: overall spoilage rate is about 10%.
Weather: sunnyResult: sell out all the product.
Weather of Summer(Jun to Aug) in South Maryland:
Average rainfall/precipitation: 286.5 mmAverage rainy days: 22.3 days
Strategy Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertaintyApportionAnalysis
uNcertainty - Weather Conditions
Best
Average
condition Revenue & Profit per week Action
Worst
Rainy days 20<X<30
Rainy days X<20
Rainy days X>20
Revenue: $4478.12Profit: $2137.29
Revenue: $4333.81Profit: $1992.98
Revenue:$3756.55Profit: $1415.73
Shift the scale from farmers’ market to restaurants and CSA channel.
Make preparation for different weather conditions.Make preparation for different weather conditions.
uNcertainty
2. Gasoline Price2. Gasoline PriceThe pump price is raised
Enlarge the sale scale of CSA.
Decrease the delivery of long distance restaurants.
Outsource the delivery service.
What to doWhat to do
IfIf
ThenThen The cost of delivery increases
2009 Nov
$ 2.65 per gallon
2010 Nov
$ 2.82 per gallon
2011 Nov
$ ?
10% increased
Still increasing
Strategy Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertaintyApportionAnalysis
Increasing Price of fertilizer Mitigation:Grow those crops that use less fertilizer.Raise the price slightly.
Rapid InflationMitigation:Increase the price
Pay attention to the other uncertaintiesPay attention to the other uncertainties
uNcertainty
Strategy Analysis
Case Overview
Utilization & Implementation
CurrentSituation
uNcertaintyApportionAnalysis
A STORM framework Analysis
Social Conditions
Technical Conditions
Organizational Conditions
Revenue Conditions
Market Conditions
Social Conditions
Technical Conditions
Organizational Conditions
Revenue Conditions
Market Conditions
A. Case OverviewA. Case Overview
B. Current Situation AnalysisB. Current Situation Analysis
D. Strategy PositioningD. Strategy Positioning
E. Utilization & ImplementationE. Utilization & Implementation
F. uNcertaintyF. uNcertainty
C. Apportion AnalysisC. Apportion Analysis
Summary
A SUN Solution
Management Accounting Approaches such as Linear Programming and Sensitivity Analysis are applied to help Even’ Star Organic Farm go from storm to sun.
Management Accounting Approaches such as Linear Programming and Sensitivity Analysis are applied to help Even’ Star Organic Farm go from storm to sun.
Thank You for Your Time!
Dream ChasersFrom Sun Yat-sen University
ZHANG WeiHUANG PeilongPENG WeijianLIU Mengning