Kanthal Case
Kanthal Case
Executive Summary Over the years Kanthal has used its traditional accounting management system to cost its products. In 1985, when Carl-Erik Ridderstrale became president he developed the Kanthal 90 plan to increase overall profitability. He quickly recognized that in order to implement this plan a new account management system was needed to supplement the new strategy. In lieu of this need a new account management system was devised. Under the new cost system, two broad sources of costs were identified: manufacturing and SM&A. All costs within these categories were reclassified as either volume driven or order driven. Hence, four cost pools were set up.
The implementation of the new system had some limitations and challenges:
- The validity of the costing under the new cost system
- The market dynamics and how they would impact implementation
- Danger of losing customers for stocked items
- The applicability of the new system across borders
Moreover, the new cost system revealed that two large volume customers that were unprofitable. These customers were analyzed and recommendation made on the course of action.
Introduction Kanthal is the largest of the six divisions in the Kanthal-Hoganas group of Sweden specializing in the production and sales of electronic resistance heating. Headquartered in a town near Stockholm, Kanthal has a product range consisting of 15,000 items supplying to about 10,000 customers. During the period of 1985 to 1987 it had steady sale revenue of SEK (Swedish Kroner) 850 million each year. Export sales accounted for 95% of total sales. Kanthal consisted of three divisions:
- Kanthal Heating Technology division supplied products like heating wire and ribbon, foil elements, machinery and precision wire. Kanthal was a world leader in supplying heating alloys with a market share of 25%.
- Kanthal Furnace Products produced a variety of heating elements for electric industrial furnaces. Kanthal was a prominent
Executive Summary Over the years Kanthal has used its traditional accounting management system to cost its products. In 1985, when Carl-Erik Ridderstrale became president he developed the Kanthal 90 plan to increase overall profitability. He quickly recognized that in order to implement this plan a new account management system was needed to supplement the new strategy. In lieu of this need a new account management system was devised. Under the new cost system, two broad sources of costs were identified: manufacturing and SM&A. All costs within these categories were reclassified as either volume driven or order driven. Hence, four cost pools were set up.
The implementation of the new system had some limitations and challenges:
- The validity of the costing under the new cost system
- The market dynamics and how they would impact implementation
- Danger of losing customers for stocked items
- The applicability of the new system across borders
Moreover, the new cost system revealed that two large volume customers that were unprofitable. These customers were analyzed and recommendation made on the course of action.
Introduction Kanthal is the largest of the six divisions in the Kanthal-Hoganas group of Sweden specializing in the production and sales of electronic resistance heating. Headquartered in a town near Stockholm, Kanthal has a product range consisting of 15,000 items supplying to about 10,000 customers. During the period of 1985 to 1987 it had steady sale revenue of SEK (Swedish Kroner) 850 million each year. Export sales accounted for 95% of total sales. Kanthal consisted of three divisions:
- Kanthal Heating Technology division supplied products like heating wire and ribbon, foil elements, machinery and precision wire. Kanthal was a world leader in supplying heating alloys with a market share of 25%.
- Kanthal Furnace Products produced a variety of heating elements for electric industrial furnaces. Kanthal was a prominent