Management Accounting Report: Value Chain Analysis of Raymond Limited

This report provides a comprehensive value chain analysis of Raymond Limited, an Indian garment manufacturer. It delves into the primary and secondary costs associated with the business, including labor, materials, marketing, and logistics. The analysis identifies key management accounting issues, such as the optimal utilization of resources and the need for innovation in production, sales, and marketing. The report emphasizes the importance of value chain analysis in identifying competitive advantages, promoting self-learning, and facilitating the identification, modification, or elimination of links within the value chain to improve efficiency and profitability. The conclusion highlights the value chain's role in understanding sales and production cycles.

MANAGEMENT ACCOUNTING

INTRODUCTION
In order to run a business with immense efficiency, a business organization has to follow certain
principles and ethics. There are various business processes that are adopted by the business
organization, one of which is value chain analysis (Atkinson, 2012). The company chosen by me
is a manufacturer of garments and is based in India known as Raymond Limited. As we know,
India is one of the fourth largest manufacturers of garments. Value chain analysis is considered
to be a significant business process in the line of manufacturing of garments and products. In the
initiation stage of any business, it is a difficult task to understand about the business completely
and therefore, the company is not able to reduce the cost optimally. So, it can be said to be a
slow and a time consuming business process. In the later stage of the business cycle, the
workings of the business become more clear and it becomes convenient to classify and analyze
the different cost that are related to the products manufactured.

VALUE CHAIN ANALYSIS
A series of analytical steps is known as value chain. Costs can be classified into two broad
categories- Primary costs and Secondary costs. The costs that are directly attributable to the final
product are ranked prior to rest of the costs. After which, all the costs are analyzed in depth and
steps are taken to reduce costs. Value chain can also be defined as an internal process that a
company goes through for converting inputs into outputs (Berry, 2009).
The primary costs related to a garment manufacturing unit are labor cost as well as direct
material cost. There are various types of direct materials that are used such as fabric, threads and
buttons. These cost forms a major part of the total cost of the final product.
Labor cost is considered to be the second primary cost associated with the manufacturing of
garments. If the labor is not managed properly then there might not be optimal utilization. The
other costs that has to be incurred for the final product to be manufactured is a set up of shop or a
warehouse, sales counter or the rent incurred (Boyd, 2013).
A detailed analysis about all the costs that has been incurred has to be done in order to avoid
unnecessary costs that has been incurring. There are certain secondary costs also such as
marketing, sales and logistics. The different components of total cost is studied and those cost
that generate higher value to the unit are identified and then certain steps are taken to reduce
such costs by way of finding links with secondary costs. The management accounting issue that
is faced by the company is not utilizing its resources optimally. Through value chain analysis the
company must try to utilize its resources rationally because the resources present are scarce.
This process also helps in innovating and learning about new technologies, the new ways of
production , sales and marketing operations. So, we can conclude that value chain analysis is
helpful in innovating, improving and differentiating products which leads to selling them at
premium prices.

CONCLUSION
Value chain analysis helps to find out competitive advantages. Also, there lies an opportunity of
self learning and training. Each step of the value chain analysis is considered to be a link . So
each link is identified, modified or eliminated as per the detailed analysis carried out. It also
helps the management to know about the sales cycle and production cycle (Holtzman, 2013).

References:
Atkinson, A. A. (2012). Management accounting. Upper Saddle River, N.J.: Paerson.
Berry, L. E. (2009). Management accounting demystified. New York: McGraw-Hill.
Boyd, W. K. (2013). Cost Accounting For Dummies. Hoboken: Wiley.
Holtzman, M. (2013). Managerial Accounting For Dummies. Hoboken, NJ: Wiley.