Peterson Carton Services, one of the top 30 carton product manufacturers in UK, is facing losses despite increase in sales growth and manufacturing activities. The management team is on pressure to show the board members on how they are going to meet the annual budgeted profit with continuous losses in the first two months of the year. On one hand the fragmented carton industry is becoming highly competitive which has resulted in a price war and on the other hand the company is facing problems in handling inventory and working capital management. Some traditional segments of PCS has become highly competitive leading to low profit margins and ultimately PCS had to quit those segments to maintain its own profit margins. At the same time a market study led by PCS has shown that new segments like windowed carton products and food has potential to be the next star. On manufacturing side PCS is facing problems with high WIP and finished goods inventory due to poor planning and estimation. Problem identification:
PCS is working in a highly fragmented industry. The fragmentation happened due to the fact that major cost in carton industry is transportation and distribution hence firm prefer to source carton products from the nearest suppliers. This along with the absence technical constraints has made the entry into the industry an easy affair. The multitude of problems that PCS face is not from the competitors alone but some problems are due to its own inefficiency in forecasting the demand and planning the production accordingly.