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Management budget

Only few GMC-players understand how to use the management budget (MB) to increase the efficiency of production, because it is not clearly marked in the official manual and extremely difficult to test in practice. But if you have a couple of thousand reports, then making correct analysis is a matter of technique.

The strongest influence MB provides on:

  1. Decreasing % of broken parts in the manufacture. Decreasing % of broken parts is not high and slightly affects on company, but will be a nice addition to financial result.
  2. Decreasing force majeure. Information about influence in detail you can read in this article.
  3. Market grows.

According to the results of numerous experiments, the optimal value of MB is about 13-14% of the overhead costs, the optimum should be predicted for all 5 periods as a constant and set in the 1 decision.

 

Test 1 - scenario 12C1

Increasing MB 180 to 200 (from 14.6% to 16.2% of the overhead costs):
1 period - market grows by 1.5% compared with 5 history report (⅔ effect)
2 period - market grows by 2.2% compared with 5 history report (full effect)
3 period - market grows by 2.6% compared with 5 history report

 

Test 2 - scenario 12C1

Increasing MB 180 to 220 (from 14.6% to 17.7% of the overhead costs):
1 period - market grows by 2.9% compared with 5 history report (⅔ effect)
2 period - market grows by 4.5% compared with 5 history report (full effect)
3 period - market grows by 5.1% compared with 5 history report

 

Test 3 - scenario 12C1

Increasing MB in 1 period. Vertical - the relative market change compared with 5 history report. Horizontal - the absolute values of MB.

 

Test 4 - 12C3 script

A similar graph for scenario 12C3, increasing MB in the 1 period.

Hints

  1. Market grows in scenario 12C1 and 12C3 practically identical, which means that MB-function does not depend on scenario and competitors in the group. So it refers to the internal factors of the company.
  2. MB has ⅔ from full effect in the current period, the full effect occurs in the next period. Effect of competitors is absent or it is insignificant.
  3. Market growth is equal for all markets and products.

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