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Accounting Priniciples Accounting Non Value Added Activities Discussion

Accounting Priniciples Accounting Non Value Added Activities Discussion

Question Description

125 words with 1reference

One:The value chain is characterized as the collection of activities and resources necessary for the product or service valued by clients to be produced and delivered (Williams, Haka, & Bettner, 2021). All organizations, even publicly traded ones are constantly searching for ways to develop services and goods that cater to their customer base. Further, organizations have one common goal, to increase profits while reducing overhead costs. This week we learned that, “Value-added activities add to the product’s or service’s desirability in the eyes of the consumer” while, “Non-value-added activities do not add to the product’s desirability” (Williams, Haka, & Bettner, 2021). Appealing to the customer base of the business is a vital factor of ensuring that one’s goods are marketable and can contribute value while improving sales. In cases where companies have to replace products or reproduce due to defects, can be costly and contributes to overhead costs; this is an example of non-value added activities.

Organizations like Proctor & Gamble are searching for opportunities to sell their goods to customers who continue to bring value to the organization. Proctor & Gamble is the parent company to many well-known brands ranging from diapers (Luv’s, Pampers), to laundry detergent (Bounce, Tide, Gain), to feminine products (Always, Tampax) (Proctor & Gamble, 2020). Due to rival companies offering like products to consumers at comparable prices, non-value added practices pose a significant danger to businesses like Proctor & Gamble. Non-value added activities that Proctor & Gamble are currently facing is the storage of raw materials, and postponed production. Both activities pose a threat to the organizations revenues. The company has attempted to change their operating procedures in regards to the storing of raw materials and their production schedules. Additionally, Proctor & Gamble have since incorporated new procedures to manage & monitor their inventory. The Interfaces P&G inventory optimization report states, “inventory management in a company of P&G’s size, scale, and complexity requires leveraging the right people, organization, and tools” (Farasyn et al., 2011). Introducing inventory management systems enables P&G to track inventory levels that can take non-value added activities and turn them into revenue, i.e. marketing the inventory. It is noted that the utilization of inventory management systems, was able to provide Proctor & Gamble “1.5 billion in cash savings” (Farasyn et al., 2011).

The next company I chose is CVS Pharmacies, they are on almost every corner in my city, and are also in Target stores across the country. CVS Pharmacies have been known to develop innovative approaches, in which their clients can pick up medications, get a flu shot, and purchase other household goods all in one visit. Many organizations such as CVS, can implement activity-based management to increase the overall value of the company. “Activity-based management involves redesigning equipment layout, acquiring higher quality materials as inputs, buying new equipment, and outsourcing repair work” (Williams, Haka, & Bettner, 2021). Non-value added activities faced by CVS Pharmacies are overstocked inventories, long wait times, and surplus of employees. By delivering health suite services while also catering to customer demands, CVS has expanded its retail processes, thus further adding value to its brand. The pharmacy provides online options and auto-renewals, which can raise a challenge for drugs or products that are overstocked; thus risking waste. CVS could increase its value while reducing non-value added activities such as waste, by utilizing a similar inventory management system as Proctor & Gamble (CVS, 2020).

References

CVS Health Corporation. (2020). CVS Health and Health Suites. Retrieved February 15, 2021, from https://cvshealth.com/sites/default/files/cvs-heal…

Farasyn, I., Humair, S., Kahn, J. I., Neale, J. J., Rosen, O., Ruark, J., . . . Willems, S. P. (2011). Inventory optimization At Procter & GAMBLE: Achieving real benefits through user adoption of Inventory Tools. Interfaces, 41(1), 66-78. doi:10.1287/inte.1100.0546

Newton, V. (2019, March 29). CVS value chain analysis & VRIO/VRIN analysis (RESOURCE-BASED VIEW). Retrieved February 15, 2021, from https://www.rancord.org/cvs-vrio-vrin-analysis-val…

Procter & Gamble. (2020, March 23). Brands. Retrieved February 15, 2021, from https://us.pg.com/brands/

Ung, A. (2013, March 21). Eliminate non-value added activities in your organization. Retrieved February 15, 2021, from https://flevy.com/blog/eliminate-non-value-added-a…

Williams, J. R., Haka, S. F., & Bettner, M. S. (2021). Financial and managerial accounting: The basis for business decisions(18th ed.). Boston, MA: McGraw-Hill.

Wilson, M. (2021, January 14). Procter & Gamble wants to reinvent how you clean your home. Retrieved February 15, 2021, from https://www.fastcompany.com/90594023/why-proctor-g…

Two: Non-value-added activities do not add to the product’s desirability,” (Williams, Haka, Bettner, & Carcello, 2018). This means, even if these added product elements or activities were removed, customers would still want to buy the product. My employer, Anthem, Inc., is a publicly-traded company registered as ANTM on the NYSE. An opportunity to reduce non-value-added activities would be the redundancy within our current IVR phone system. When members call one of our subsidiaries with a question regarding pharmacy, they are not able to call our pharmacy department directly. Instead, customers are required to speak to a general customer service representative and are then routed to the correct pharmacy member service representative. If the IVR system was improved to allow members to select a pharmacy assistance option during the initial greeting, members could avoid the additional transfers and lower the potential for grievances against the plan.

The second company with a non-value-added activity example is Domino’s Pizza, Inc., registered on the NYSE as DPZ. Domino’s allows customers to pre-order pizzas to pick-up or be delivered at a later date or time. This practice does not make the pizza more desirable; the customer would still want to order the pizza but would be limited to ordering it when needed. Domino’s would be able to eliminate this practice and would still have pizza orders.

Finally, ContextLogic, Inc. is the parent company of Wish, an online e-commerce company, and is registered on the NASDAQ as WISH. Wish has an online reputation for being inexpensive and diverse, but with slow delivery to customers, especially when compared to Amazon. The non-added-value activity example is the supplier deliveries that are poor quality. Customer reviews found on Google.com demonstrate customer dissatisfaction and disappointment in product quality received, with many customers suggesting the products are made in China. Customers that don’t feel the received product aligns with the ordered product will not find the product more desirable.

References

Williams, J. R., Haka, S. F., Bettner, M. S., & Carcello, J. V. (2018). Financial & Managerial Accounting: The Basis for Business Decisions(18th ed.). New York, NY: McGraw Hill Education.


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