Amar Toshniwal PGDM A Roll No.

Reichard is faced with the problem of having inventory of steel rings and facing stiff competition from plastic rings , the decision to take is to either to switch to production of plastic rings or to continue making steel rings. The plastic rings are more durable and profitable. They are demanded for their durability and cost less to produce. The excess inventory in hand worth $ 93000 and raw materials are a cause of concern for the management .

Producing Plastic rings do provide better profits when compared to steel rings . The cost of manufacturing Plastic rings is $ 66.60 and for steel rings is $ 263.85. The margin is also high incase of plastic rings. For Reichard the effect of introduction of Plastic ring has been only for 10% of its sales , the rest 90% is unaffected , thus they should look to sell their inventory in the rest of the market. The consideration of switching to plastic rings is attractive but would be difficult to implement as the company already is very competent in the field of steel rings and the switchover would mean additional cost and time . The profits of Plastic rings seems higher in short run but in long run with more competition the profits would go down. Thus, Reichard should concentrate its resources towards Steel rings and continue manufacturing steel rings . They should try and defer the entry of Plastic rings . In the long run , they should seek to switch to Plastic rings as the market conditions change, thus they have option of outsourcing or manufacturing depending on the management s choice .

Rohan Sharma PGDM-A Roll No. 41 Reichard is faced with the problem of whether to switch to production of plastic rings or to continue making Steel Rings. The plastic rings are more durable and profitable. They are demanded for their durability and cost less to produce. They also need to consider how to manage the inventory (worth $ 93000) and raw material in hand. Switching to plastic rings do seem attractive with better profits and low cost , but if we consider the effect of entry of plastic rings its been only to 10% of the market , 90% of the market is using steel rings. We can sell the inventory in the 90% of the market in shot run . Switching to plastic rings means lots of investment and product development time , whereas incase of steel rings we are still the very competent . The profits of platic ring is high only for the short term , in long run with competition the prices would fall drastically . Thus, switching to plastic rings just now would not be a better option. Reichard , should look to switch to plastic rings in the long run i.e. they can outsource or manufacture plastic rings in the long run . But as per current market scenario switching to plastic rings not required.