Jan 16, 2013
BIC Pen: Case Study
This value chain analysis of the BIC Corporation is occurring to provide individual with the knowledge of the thought process that businessman/businesswomen in the supply chain field use every day when deciding what company to purchase a certain product from. This process includes the breaking down of the company’s financial report and whether the product is eco-friendly. Financial report of any company usually includes material cost, manufacturing cost, direct labor, overhead cost, sg&a, packaging cost, transportation cost, and profit. This paper will be about breaking down BIC pens financial report to see if they are charge buyers the right price for 10000 pens per year for 5 years.
The first step in figuring out the material cost is to take the pen part and weight each part, when this step is complete there will be 10 different parts to take into consideration. These parts are plastic ink holder/inner cap which weighs .9gram or 0.00198416 pound, Ink and there is 0.27ml of ink in each pen, Top Cap, Body, bottom Cap, and Ballpoint assembly holder which weighs 3.5grams or 0.00771618 pound, Ballpoint Holder which weighs 1grams or 0.000220462 pound, Socket for Ballpoint which weighs 1grams 0.000220462 pound, and Ballpoint which is .1 grams or 0.000220462 pound. The total material cost is $1961.59376 and the calculations for this are on the back-up page.
Direct Manufacturing Cost:
The manufacturing process of the BIC when making pens consists of using 4 machines which are the key components of the production of the 10,000 pen per year. These machines are injection molding machine, compressor for tungsten carbide, lacking machine, and pen assembling machine. The injection molding machine is used to make all the plastic components of the pen, the compressor for tungsten carbide is used for making the ballpoint of the pen, the lacking machine is used to sand the ballpoint before attaching them to the pen, and the pen assembling machine is used to assemble all 10 parts together before shipping them out. Total direct manufacturing cost plus tooling is $72880.68497 and the calculations for this are on the back-up page.
The direct labor cost included general supervisor, shift supervisor, machine operator, set-up person, inspector, mold maintenance person, and machine maintenance. The general supervisor gets paid a salary of $45000 per year, shift supervisor gets a salary of $24000 per year, machine operator get $7.50/hr, set-up person gets $11.40/hr, inspector gets $9.00/hr, mold maintenance person gets $18.00/hr, and machine maintenance gets $16.00/hr. The total Direct labor cost per year is $315688 and the calculations for this are on the back-up page.
Electricity each machine roughly uses 300KVA of power each time it is used and the peak electrical requirement for each machine is 1200KVA. Using 50% real time factor usage, there is a need for 600KVA per hour. Also the uses 4000 hours of electricity, electricity use would equal 2400000 Kilowatt hours. Electricity in the United States cost $0.05 per Kilowatt hour so electricity cost (2400000*0.050)=120000 per year. Water water cost roughly $2.09 per gallon in the United State. The amount of water need to make a 1 pound of plastic is 101 gallons and 1 pen weight about 1.5 pounds. To calculate a estimate of the amount of water is used per year in the plant here is the math (1.5*2000)=3000 pounds of plastics and (3000*101)=303000 gallons of water. The total amount spent on water per year is $633270 Building Lease $50,000 for building, $108000 for building maintenance, and 15,000 for insurance per year. Packaging:
A 12 pen box of BIC pen weighs 0.8 ounces equals 0.05 pounds and cardboard is $0.025 per pound. 10000 pen needs to be produced per year so (10000/12) =833 boxes. Total cost of cardboard of packaging for the pens is (833 boxes*0.05)*0.025=$1.04125...
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