Document 2j52zo42LdRBnzBRLL8aRN1rb

WAIXBOARD ACCESSORIES - EVALUATION I OBJECTIVE To evaluate all"aspects of research, production, sales, and ^ merchandising of wallboard accessories manufactured at Antioch with the objective of increasing the profitability of the opera tion. Non-manufactured products/ such as tape and east-coast accessories are not included. . II SUMMARY ANALYSIS . Potential sales of wallboard accessories (based on covering only our own wallboard) amounts to 1-3/4 to 2 million dollars per year. This volume would utilize approximately two 5-day, 8-hour shifts of the Antioch capacity. Sales in 1964 and 1965 amounted to $524,000 per year with gross profits of $22,000 (4.2$) per year. This amounted to 26 of the dry powder market and 4155 of the Pre-4iix market. Sales in the first 3 months of 1966 have dropped to a lower rate, 1855 of dry powders and 38% of Pre-Mix markets. An analysis of this subject indicates that there are a number of problems in each department of the company that need correcting (see detailed analysis). Most can be taken care of with little expenditure except time, interest, and effort. A series of recommendations for each department are outlined below, including a budget appropriation of approximately $5,COO $10,C00 for merchandising and training. If these are carried out, we could attain a reasonable and practi cal goal of $1,080,000 sales per. year and gross profits of $130,000 (16.7J5) per year. In effect, this is doubling our present sales and increasing profits eight fold. Unless a program similar to that recommended is carried out, - we should be content with our present performance and profits. III RECOMMENDATIONS ' A. General Management 1. Instill in each department the importance of this business in the over-all company operations and require that ade quate continuing attention be paid to it by all departments including intra-department cooperation. .2 Provide a merchandising budget of approximately $5,000 - $10,000 per year on a continuing basis. ' : w' J* . * -2- B. Research IA series of recommendations for quality control, product improvement, and new products were given to the research department in September 1965. This included 6 product revisions and 3 new products. Work on quality control and the product revisions should be completed by May through September 1966 and 1 of the new products by January 1967 Operations J, No major changes are recommended at this time. 2. Adequate supervision and continued attention should be directed to efficiency and quality control in cooperation with the research department. D. Sales 1. Re-establish emphasis on sales of accessories at all levels in the sales department. 2. Assign definite sales responsibility, authority and accountability in the General Sales Office. j. Establish sales quotas by specific products for each sales district. Quotas determined by market and gross profits. (See detailed analysis) 4. Consider the assigning of a field sales, accessory specialist in Region II. - 5. Develop a specific sales program to obtain higher dealer sales of high profit prc-ucts. (5# and 10# joint compound, combo units) E. Merchandising l' Review competitive practices and revise and update all present price lists. Eliminate as many FMA's as possible. Revise and update all present technical bulletins. Prepare a new updated-product brochure. . Prepare and conduct a formal in-depth product training program. * 5. Establish a continuing sales promotion program. vm XV PET.ATLED ANALYSIS -3- A. Research In September, 1965, the following recommendations were prepared. These were a result of a study of the products, their manufacture, and field acceptance. Following each recommendation is the present status. Most of the immediate work will be completed by May though September, 1966. Review, revise and up-date Test Method Bulletin T-7 (i960). Several test methods may be antiquated, several need revision and several are missing. Some need to be more definitive as to requirements. 2. In cooperation with Production and Quality Control Departments, review and revise as necessary Process Bulletins J-l, <7-2 and J-3 (1961-1963). In particular, study the use of re-run material. While it amounts to only approximately 5$ per batch, could it be vised elsewhere, such as in Filler Compound? Also review Quality Control Schedule of raw material and finished product testing and set up a workable schedule. 3. Review all Raw Material Bulletins and revise as necessary. 4. Review all Product Bulletins - J-10, J-ll, J-12, J-13, J-20, J-21, J-30, J-31, J-33, <7-35, J-40, and J-50. Where no formulas or tests need changing, put in format ana have references consistent with test method, process ana raw material bulletins. See also Item 7 (a). 5. When Items 1 through 4 are completed, schedule a formal meeting with Production and Quality Control and thoroughly review all of the above. STATUS - Work on Items 1 through 5 is underway and should be completed by September. 1966. Review existing literature - Technical Bulletins 5602A, 5605, 5607, 5609A, 5610/5611, 5612A and 5614. Prepare for use of Merchandising Department for their preparation of Technical and Product Literature and Development of Sales ana Product Training Programs, complete details for each accessory product including the following: (a) Uses (b) Basic Properties - distinguishing features (c) Coverage (d) Advantages ` (e) Limitations, including temperature, humidity, drying conditions, etc. ' *v// .1 cty (f) Field mixing instructions, including type of ' equipment by description and name, if possible. (g) Application instructions, including specific references to tools recommended. (h) Field problems and remedies. STATUS - Considerable data now available in file. Research will assist with additional information when Merchandising Department requests it. roduct Development - Immediate Future )J(a Review all formulas in light of simplifying production and maintaining consistency in quality. Suggestions along this line are: 1. Use of fixed formulas for dry batch mixing. (^2^ Reduce the number of raw materials used ir. J:--' each formula. ` y* y 3. Review the product specifications. At present specifications are developed around a particular formula. /Should not specifications be developed according to field requirements and then formulas developedy , STATUS - Currently underway. Should be completed by September, 1966. (b) Develop new formula (1) to replace FC-1 Finishing Compound. Should be adaptable to all areas for both hand or tool application. 'p'A STATUS - Being field tested,^will be available for sale' in May, 1966. * (c) Develop new formula (1) to replace JC and JC-1 Joint Compound. Should be adaptable to all areas for both hand or tool application. STATUS - This will be studied later as to actual need. (d) Study open time characteristic of Vinyl Joint and Finishing Compounds. If it can be improved, develop one Joint and one Finishing Compound applicable to all areas for both hand and tool application. STATUS - Recommend discontinuing vinyl joint compound.*^ V/ork on Finishing Compound will be scheduled later. ^ ` -5- (e) Combine KaiserTex and Cover-Tex into one product applicable to all areas for walls and ceilings for hand application. - STATUS - Work underway, scheduled for completion by ptember 15, 1966. # (f) Develop new Spray Cover-Tex with less porosity and more hardness for all areas. $TATU5 - Work completed, awaiting field test. (g)j Develop a new K-Spray for Southern California. Need more uniform texture and lower cost. Possibly con sider use of K-4 Fine formula. STATUS - Held in abeyance at present due to costs. - 8. Product Development - Future One coat K-Sorav troe texture for electric heat ceilings. ' Work not scheduled as yet. One coat joint treatment and texture for walls and ceilings (similar approach as Veneer Plaster). STATUS - Work not scheduled as yet. (c) One-day Joint Compound STATUS - Work scheduled for completion in December, 1966. Other - In addition to the above. Research has completed work on a 1-gallon pre-mix product for dealers. This product will be available for sale in May, 1966. ! -6- B. Operations Costs - Present method of establishing standard costs is based upon a total dollar volume forecast of all products. This ' dollar volume is then broken down into individual products using the previous year's product mix percentages. Unit costs are determined by adding the raw material costs, (deter mined by formula) and the conversion cost. The conversion ' cost is determined by taking the full 8-hour shift labor cost and prorating it over the actual quantity produced in > that shift. Therefore, in the past with the plant operating at about 50# capacity, the unit costs were considerably higher, than the optimum. ' Table I shows the par costs for 1965 and 1966 for their respec tive production rates. If the production rate were increased to the capacity of one shift for dry powders, X-Spray, and pre-mix, the unit costs would drop $14.08/ton for dry powders, $9.4l/ton for X-Spray, and $11.58/ton for Pre-Mix. Since the cost of raw materials varies only slightly, most of the savings is in conversion costs. % The following shows the conversion cost comparison. 1965 par Dry Powders ?32J7/ton BaSSSC $31.20/ton ?re $41.42/ton 1966 par 34.79/ton 32.05/ton 39.45/ton 1 shift par 20.71/ton 22.64/ton 27.67/Ton saving over ( ( 1966 par ( 14.08/ton 0.704/cwt 9.4l/ton 0.47/cwt 11.58/ton 0.072/gallon Unit costs by product based on one shift production are also shown in Table I. Unit costs for two or three full shifts would only be slightly lower than one shift. The main point to con sider is that part capacity shifts increase unit costs considerably. The operations department should review all costs of conversion and raw materials to see that they are at a minimum. . -7- Oualitv - It is the general opinion of many of our company personnel that the quality of wallboard accessory products is extremely poor and makes the product difficult to sell. While there have been some obvious quality problems, the over-all quality is actually better than several of our other product lines where the problem is not considered as serious. Following .is a study of dollar settlements for quality and other allowances for 1965. ft ' . RETURNS AND ALLOWANCES - 1965 . Product Line Sales Quality . Other Toxs.1 Insulating $ 5,529,291 (St. Helens) $35,035(.645S) $ 7,747(.145&) $ 72,782(.78$) Plaster (LB, Ant. & Seattle) 624,605 3,532(.57$) 6,273(1.0055) - 9,805(1.57$) Accessories (LB, Ant. & Seattle) 523,633 2,61l(.50$) 4,070(.78$) 6,631(1.28$) Metal (Pico Rivera) 377,631 1,175(.31$) 1,549(.41$) 2,724(.72$) Lath & V/allbrd 15,129,127 (LB, Ant. & Seattle) 23,691(.1655) 43,122(.28$) 66,813(.44$) TOTAL $22,184,287 $66,044(.305S) $62,76l(.28$) $128,805(,55$) On the other hand, there are sufficient quality problems to warrant careful attention to* this by operating personnel. It is important that cooperation with the Research Department be undertaken particularly with reference to items 1-5 of the Research recommendation. There is adequate time to do this since the operating personnel are only working 50/S of the time. Production Sentiment - Present hand batching and hand mixer feeding is limited in volume and requires constant supervision for quality. Until such time as sales volume substantially in creases, no recommendations are being made for changes. Present volume of Pre-Mix is 181,000 gallons per year and it is proposed that we sell 260,000 gallons per year or one 5-day, 8 hour shift of production. Even with the savings of 50.072 per gallon, we still take a loss in shipping to Southern California. > f If we could sell 512,000 gallons per year (sales indicates ' that it is possible) and produce it on one shift at the same cost, we could save an estimated 50,05 a gallon or $25,000 per year and could ship to Southern California at a profit of $0.04 a gallon. Studies should be initiated to determine the cost of doubling the capacity of the wet Pre-Mix production equipment. \ -9- C. 24IS. Martel Hie total market for wallboard accessories is almost impossible to forecast; however, it is possible to estimate the market based on the wallboard forecast for Kaiser Gypsum. This market would be a practical goal for sales of accessories. Based on the 1966 wallboard forecast for the Antioch, Long Beach, and Seattle plants, the potential market for dry powders would be 215,625 cwt per year or 900 tons per month. For Pre-Mix, it would be 512,750 gallons per year or 42,730 gallons per month. At current competitive prices and optimum costs, the annual mill net sales and gross profits will be as follows: DRY PRODUCTS. District Quantity - cwt Mill Net 5 Cross Profit 1100 2100 2200 2300 2400 64,960 50,500 25,200 27,990 26.075 $ 491,000 369,000 189,000 230,000 --516,000 $(-26,000) 61,000 36,000 . 47,000 56.000 TOTAL 215,625 51,495,000 $174,000 ESBaHX Bisirisl 1100 2100 2200 2300 2400 Quantity-Gallons 437,250 38,300 19,200 18,000 5 259,100 * 27,200 13,600 13,300 - TOTAL 512,750 5 313,200 ALL PRODUCTS $1,808,200 Gross Profit $(-4,375) 2,680 1,345 630 - $ 280 $174,280 Detailed breakdown of the market by district and product are shown in Tables II - VII. -10. Market Penetration Since tile 1966 forecast is reasonably close to that for 1964 and 1965, the sales by product and district are also shown in Tables IX - VII. The per cent of market can be summarised as follows: ' District 1964 zJil Dry Powders - Pre-mix 1st 3 months of 1966 Drv Powders - Pre-nix 1100 2100 ( 2200 ( , 23CO 2400 5.4* ' 36.0* 56.0* 30.5* 39.5* ' 32.0* 117.0* .. -..... 3.2* 9.2* 35.0* 53.0* 30.8* 40.5* 2.5?, 0.3* 78.0* ____ Canpany Average 26.0* 41.0* ' 18.3* 37.5* The mill net sales and gross profits for 1965 were: Quantity Mill Net S Gross Profit ! Dry Pre-mix TOTAL 55,600 cwt 161,000 gallon 5363,133 160 -500 5523,633 5 46,080 .(-34.10?) $ 21,975 The 1ow percentages of dry powders sold in Southern California can be accounted for in that the majority of the market uses spray tex tures for walls and ceilings and both of our products would be sold at a loss. Of the dry powders, there are two categories, the 25# and 50# bags used by applicators and the 5# and 10# bags and combo units for dealer over-the-counter trade. The percentage breakdown is as follows: 1100 2100 ( 2200 ( 2300 2400 ' Compary Average 91.3* 97.4* 96.3* 97.0* 96.5* ' fiealsz 8.7* 2.6* 3.7* 3.0* 3.5* 1st 3 months of 1966 ADDlicator Dealer 94 6 90 10 94 6 98 2 22 -1 96 4 lie total sales of dealer products amounted to 1950 cwt in 1965. -11- P^-rspnTifl Efficiency - Sales of wallboard accessories is presently by nallboard specialists and line salesmen. There are no accessory specialists In the field. Most of the salesmen have limited product knowledge and little, if any, training in the product line and how to handle complaints. Because of previous quality problems, competitive practices, lack of con fidence in product knowledge and out-of-date literature and prices, there has resulted a limited interest in selling the product line. Sales Forecast and Gross Profits - The present method of forecasting sales is by a simple dollar ratio to wallboard sales and is generally related to past dales performance. This method bears no relation to the actual market potential, nor takes into account optimum production costs or gross profits by product or district. Table VIII shows the gross profits based on the 1966 forecast resulting in a number of loss items. In 1966, we are forecasting sales of $600,000 and gross profits of $54,000 (955). A more realistic method of forecasting would be to determine the produc tion capacity for one-shift production (optimum costs), the gross profits 'ey product and district and set quotas to use this capacity to bring in maximum profits. Also shown in Table VIII are the optimum gross profits that could be expected based on optimum costs and current competitive mill nets. ' Ar. example of this method of forecasting is shown in Tables II - VII. Individual product quotas by district are related to the actual avail able market and the gross profit. Note that for District 1100 the primary sales effort is on pre-mix and dealer products. Texture products which are sold at a loss should not be promoted. Based on this, the yearly sales could be $1,060,000 with gross profits of 180,0G0 (16.7?>) broken down by district as follows: DRY PRODUCTS gteScfei 1100 2100 2200 2300 2400 TOTAL Quetta,,.-..., 4,500 49,000 24,800 19,800 -19,..2QQ 117,600 Mill Net S 5 43,900 ' 358,200 185,800 162,200 161-600 $911,700 Gross Profit S 9,560 59,040 35,620 33,410 41'870 $179,520 (2l) District 1100 2100 2200 2300 2400 9,yahvitY-Oall<?P?, 197.000 30,000 . 15,000 18,000 - $122,650 21,300 10,650 13,250 TOTAL 260,000 167,850 ALL PRODUCTS 1,079,550 pfoss Pfl?, $(-2,905) 2,100 1,050 630 $ 875 (0.5?) 180,395 (16.7?) -12- If It is not practical to eliminate entirely sales of texture products to District 1100, the sales level could be kept to a minimum as in the past (1,500 cut per year) and absorb a slight loss (less than $250). the importance of dealer product sales should be noted. The gross . profit margin averages 30SC as compared to 18% for applicator dry powders and 0.5^ for Pre-Mix. By increasing dealer product sales from 1,945 cut per year to 7,500 cut (6.4/C of product mix) would bring in $31,200 gross profits (17.3/C of total profit) or more than current total gross profits from all products. If the above is not considered satisfactory, we could consider the following: 1. Produce only dry powders at Antioch and restrict shipments to Region II only. 2. Arrange for the local purchase (L, A.) under our label of all accessory products for distribution in District 1100 (Assuming profitable arrangements can be made.) 3. Ship Pre-Mix from L. A. to Region II even if a loss would occur. If this were done, then shipments of dry powders to Region II could be 136,300 cut per year with sales of $1,050,000 and gross profirs of $204,000 (assuming optimum costs and gross profits).' To this -would have to be subtracted a small loss for shipments of Pre-Mix to Region II from L. A, (estimated at $6,000.) Assuming 50/C market penetration, the sales in District could be $400,000 per year. Gross profits would depend upon costs but should not be less than $40,000 - $60,000 per year. -13 D. Merchandising Prices - Our current price lists for Region I and II are from one to four years old, have old product information and in many areas for several products are not competitive. Many salesmen using these price lists have found they are not competitive and as a result have not solicited soles. We have on the other hand, about 40 FMA's (12 alone in District 2100) in which we have established competitive prices. In some cases, these are not consistent in that different prices are offered for the same product or different quantities at the same price and in one case different prices to the same customer by different PMA's, Of most importance, is that most of the field salesmen do not know that the FMA's exist. All price lists should be brought up to date and as many F?4A's eliminated as possible. Techr.ical bulletins - We presently have seven technical bulletins (5605, 5607, 5609A, 5610, 5611, 5612A and 5614,) all of which are from two to seven years old. Many are out of date and we do not have any for some of our products. All of them should be revised, consolidated, and new bulletins issued. , Product Literature - The only literature available is 1-1/2 pages contained in our "Gypsum '.'tailboard and Accessories" brochure (Technical Bulletin No. 5602A). Thi3 information needs updating. A new brochure on accessories alone would be desirable. Advertising '.nd Sales Promotion - We have not had in the recent past, any advertising or sales promotion program for accessories. While major programs are not necessary, a definite sustaining sales promotion program of a limited nature should be provided. Product ar.d Sales Training - We have not had in the recent past,any product or sales training on accessories. This is badly needed and considerable effort should be' directed to set up such a program as soon as possible. J '. WAttBOAHfi ACCESSORIES r tRKET.r .SALES PROPOSED. FORECAST .M IL .NET] .PROFITS:---------------------------------------------------------------- LU O A -lII -KALLEOAiU) ACCESSORIES. `1 .. .SALES..- PKDP0SED_FPRECAST'.MIX1_NE.TI_SRQ?PS ____________TALEJ1 XICMMJ -. VAUBOAJ ACCESSORIES GROSS PROFITS. . 'TABEE_VI.n