【正文】 PLP analysis takes time, so prioritize?Get buyin of finance managers early in the process。 PLP ModelThe Bain team’s first step was to understand Vulcan’s total costs and their relative importance. The team studied a representative facility, Petersburg.41CU7020998JZAbcBOS Product Line ProfitabilityVulcan PLP Methodology () Revenue: ?Actual revenue by order itemThe team went through each cost ponent and developed a methodology to allocate costs to foil and coated sheet products. Conversion: ?Adjust standard hours by partnumber and methodnumber for each piece of equipment using November 1996 and March 1997 actual vs. standard hours parison–capture actual operating hours for each piece of equipment using revised equipment time sheets–determine how accurately standards capture actual hours–understand drivers of difference between standard and actual–calculate adjustment factor to apply to full year 1996 by each piece of equipmentPaint: ?Actual paint cost by partnumber and methodnumberMetal: ?Use daily bookings data to assign actual primary metal price by customer sales order?Use actual price/lb for alloys and hardeners?Add melt and dross loss by alloy type42CU7020998JZAbcBOS Product Line ProfitabilityVulcan PLP Methodology () Freight: ?Actual freight costs by order itemWorking capital: ?Actual accounts receivable by general product category (foil vs. coated sheet) and finished goods by partnumber methodnumberSelling: ?Allocated by actual salesperson’s time spent by marketGA: ?Allocated as a percentage of sales dollars43CU7020998JZAbcBOS Product Line ProfitabilityVulcan Petersburg Material CostsSource: Petersburg Metal ReceiptsThe Bain team began by examining the largest cost area, direct materials.44CU7020998JZAbcBOS Product Line ProfitabilityVulcan Matching Data Since metal price was not captured in the shipments database, it had to be matched with the bookings database to get an accurate metal price.1996 Daily Sales Bookings Data 1996 Order Items Shipped DataOrder datePromised dateCustomer nameOrdered lbsUnit sales priceFixed/float metal priceOrder dateOriginal promise dateCustomer nameOrdered lbsUnit sales price45CU7020998JZAbcBOS Product Line ProfitabilityVulcan Total Metal Costs *Dross is the nonusable scum that rises to the top when aluminum is meltedFrom manufacturing interviews, the team learned that the total actual metal cost would be affected by the melt and dross* loss associated with foil and coated sheet.Primary metalMelt and dross* lossActual metal cost+Actual alloys and hardener cost?Use industry standard mix+46CU7020998JZAbcBOS Product Line ProfitabilityVulcan Conversion Cost Methodology *Methodnumber distinguished among the various routings a product could take through the mill’s equipmentConversion costs were driven by production and support function activities.Actual conversion costFixed Variable Fixed VariableProduction Support?., hot mill?Cold mill 3?Chester mills?Henrico mills?., MIS?Accounting?Building and grounds?SchedulingDirectly assigned to equipment Allocated to part number by fixed cost drivers47CU7020998JZAbcBOS Product Line ProfitabilityVulcan Conversion Cost Sources*Methodnumber distinguished among the various routings a product could take through the mill’s equipmentThe team used several Vulcan sources to build conversion costs from the bottom up.Actual conversion cost by production and support cost centers?Fixed/variable splits from management interviewsProduction data by production cost center?Standard operating hours and pounds?By partnumber and methodnumber*Revised equipment time sheets by production cost center?Actual operating hours by output work order item–November 1996–FebruaryMarch 199748CU7020998JZAbcBOS Product Line ProfitabilityVulcan Production and Support Costs Vulcan finance managers agreed to the methodology of assigning production and support dollars.Production dollars?Directly assignedSupport dollars(., MIS, accounting)+?Allocated within each piece of equipment by actual hours?Allocated by fixed cost driversStep 1 Equipment cost center:Step 2 Partnumber/ methodnumber:Actual conversion cost49CU7020998JZAbcBOS Product Line ProfitabilityVulcan Actual Hours Methodology Another methodology was required to adjust standard hours to the actual hours spent converting the ingots to foil or coated sheet.Actual production data Plant personnel experienceModel accuracy of standardsDetermine cost driversAdjust standard hours based on cost driversActual hours by partnumber and methodnumber50CU7020998JZAbcBOS Product Line ProfitabilityVulcan Fixed Cost Drivers Allocation Method?By pounds?By pounds?By sales dollars?By pounds?MIS?Traffic?Purchasing?By pounds– weighted for foil– weighted for coated sheetThe team developed an allocation method for fixed costs, too.51CU7020998JZAbcBOS Product Line ProfitabilityVulcan Total Conversion CostsSource: 1996 Plant Cost Summary ReportThe team allocated conversion costs to foil and coated sheet.CoatedFoil– MIS– Accounting52CU7020998JZAbcBOS Product Line ProfitabilityVulcan Product Line ProfitabilitySource: Bain Product Line Profitability ModelFoil contributes most of the total gross margin dollars.53CU7020998JZAbcBOS Product Line ProfitabilityVulcan Profit Before Tax Source: Bain Product Line Profit AnalysisFoil contributed all of Vulcan’s profits. Coated sheet lost over $.54CU7020998JZAbcBOS Product Line ProfitabilityVulcan Remendations The team used the PLP results to make specific remendations for Vul