Amcor Essay: Global Packaging Solutions.

History of Amcor

Amcor Case Study

Amcor is a global leader in responsible global packaging solutions supplying a broad range of rigid & flexible packaging products. It is a large company, with revenues of US$9.5 billion, 27 200 employees, 66 000 shareholders and 180+ sites in 43 countries. Amcor's history dates back to the 1860s when Samuel Ramsden arrived in Australia to seek his fortune in a new land. He established Victoria's first paper mill on the banks of the Yarra River in Melbourne. For most of its life this operation was known as Australian Paper Manufacturers. In the 1970s and 1980s the company added a range of diverse packaging interests to its traditional papermaking activities and in 1986 changed its name to Amcor Ltd. Amcor now serves markets around the globe by pursuing profitable organic growth, strategic acquisitions and divestments and the provision of packaging solutions in Australia, Europe, Latin America, Switzerland and the United States of America.

Amcor’s is world’s largest producer of Polyethylene terephthalate (PET) bottles (such as those used by Coca and many other household and industrial products). Other packaging products produced include materials for industrial applications such as aerospace, agriculture, automotive, energy and insulation. Amcor also manufactures flexible and rigid packaging for food, household items, personal and homecare products, tobacco products, beverages, hospital sterilisation units, medical devices, and pharmaceuticals. They also provide services in packaging design, materials, testing and recycling. Amcor is currently structured into three business groups namely, Flexible Packaging, Rigid Plastics and Tobacco and Specialty Packaging.

Amcor’s main competitors are Ball Corp, Mondi PLC, Sealed Air Corp, UPM Kymmene OYJ and Weyerhaeuser Co. Amcor is committed to light weight packaging innovations which save thousands of tonnes of the earth’s resources and reduce CO2 emissions through lower raw materials usage and reduced fuel consumption for the transport of its products. Efficient use of raw materials reduces the volume of material that needs to be managed through recycling programs and reduces the quantity of packaging material sent to landfill. Amcor works strategically with partners throughout their entire value chain, and is thus able to unlock powerful social, environmental and economic opportunities throughout a product’s entire life cycle. For example, Amcor’s rigid plastic bottle value chain starts with packaging planning and design, raw material (plastic resins) purchase, manufacture and transport, conversion of raw materials into rigid plastic packaging, establishing targets to reduce waste to landfill, greenhouse gas emissions and municipal water use, and delivery to customers’ manufacturing sites for use in packaging their products. The packaged products are then transported through an often-complicated supply chain for ultimate display and sale by retailers around the world. At the end of the product life cycle packaging can still add value, as a result of sophisticated re-cycling and energy recovery processes.

Products and Competitors

Sue was learning more about the organisation every day. Her immediate boss was the Chief Financial Officer, Nick Rafter, who organised a meeting with her. As Sue had a background in Management Accounting, the CFO felt it was in her best interest to learn the budgetary process within the organisation. He was one among the many CFOs across Amcor’s global manufacturing plants. He was the CFO of the Australian business and had the following to say:

“In Australia, we operate over 50 packaging and recycling sites in all States and Territories and are a leading manufacturer of fibre, metal, flexible plastic and glass packaging with annual sales of around A $1.9 billion. Amcor Paper is a leading producer of recycled paper, brown liners and fluting grades for the Australian and Asian markets. With the commissioning of a new Paper Machine at our Botany site (NSW), Amcor Paper will increase efficacy and capacity to suit Amcor’s internal and external requirements. As a leading packaging supplier to food, beverage and industrial manufacturers in Australia and New Zealand, Amcor Corrugated Packaging offers a full service, from design and testing through to automation and supply chain integration. Amcor Carton board supplies carton board from its Petrie Mill in Queensland, the only carton board mill in Australia, to packaging manufacturers across Australia and New Zealand. With eight plants across Australia and New Zealand, Amcor Folding Cartons has the widest geographical coverage of any carton manufacturer in the region.”

He paused and then said to Sue,

“I can carry on about the Australian operations, but my immediate problem is the annual budget process. It is a daunting task to bring together the budget for the 50 packaging and recycling sites across Australia.”

He continued

“We have to identify responsibility centres and it is often confusing to separate out cost centres, revenue centres, profit centres and investment centres. What we would like to do is to have operating budgets across the 50 sites and have a consolidated set of financial budgets for the whole Australian operation.”

At this point Sue interrupted Nick and asked him about the current budgeting process; Nick explained how each site prepares its own operating budget which is coordinated at the head office.

Nick said:

“Each manager prepares the budget for his responsibility centre within each site, but they don’t seem to get it right. There seems to be a lot of toing and froing (moving back and forth) after preparing the initial estimates.

He closed by saying:

“Surely there must be a better way of doing this. What are your ideas about these issues”?

Examine and evaluate each of the following FOUR issues and write responses to each of them in your own words.

Explain to Nick how the budgeting process at AMCOR can be used to achieve financial accountability within a responsibility framework.

Explain to Nick how budgets can become more meaningful to the managers when they reflect the strategic plan of the organisation.

Describe to Nick, with examples, how participative budgeting can give employees the feeling that ‘this is my budget’, rather than the feeling that ‘this is the budget you can impose on me’.

“It is a daunting task to bring together the budget for the 50 packaging and recycling sites across Australia,” said Nick to Sue in a conversation above. Write your comment(s) on this statement.

History of Amcor

The application of a budget is done by a business with a view to plan, coordinate and controls the activities of the business. The management of a company can appropriately set targets on the basis of the past year and current years trends with the help of a budget. This further ensures that the company is in its right path towards the strategic goals and objectives of the business. The company which is considered for the assessment is Amcor ltd which is engaged in recycling business and also has several other operations. The management of Amcor ltd needs to make the business more systematic and transparency and the same can be done by implementing flexible budgeting technique and setting targets so that the strategic goals of the business can be achieved. Another advantage which can be identified using such an approach is that the variances if any can be identified when actual performance is measured with standard set. The budget process can assist the management to measure any lag in performance and thereby formulate strategies so that the same does not take place in future period. In this manner, the business can achieve financial stability and highest level of performance in the business.

It is to be further noted that budgets needs to be reviewed on regular basis by the senior management and the same needs to compare with the milestones which are set. The management in this manner can maintain accountability in the business. It is advisable to the management of Amcor that budgeting practices needs to be implemented in the operations for proper planning and controlling the operations of the business.

The strategic plans of a business is formulated ahead of a financial year an after which a budget is prepared. The strategic plan is an overall plan which covers different performance area of the business and one of the same is financial area. The management of the company cause a budget to represents the targets which are consistent with the strategic plans of the business. The budget allows the management to estimate financial targets and also forecast the growth for the next year or next five years. The management of Amcor ltd needs to prepare the budget for the year in such a manner that it reflects the principle of the strategic plan of the business. One other advantage of budgets is that it helps in proper allocation of resources and reduces incidence of wastage. The management can make the operations more systematic in nature if budgeting practices are implemented as proper allocation of resources would be possible and proper control can be maintained.

Products and Competitors

Participative budgets are a form of budget which allows the management to take opinions of the lower level managers to take part in budget setting process and also involves the employees There is difference between participative and imposed budget as the former budget allows the opinions of the employees while the latter is basically forced. The application of participative budget provides confidence to the employees that they are valuable to the company and they are also contributing to the cause of the business. In addition to this, participative budgets tend to get achieved in most of the times as the targets are set accordingly to the resources available and efficiency level of the employees. In addition to this, participative budgets can be more realistic as viewpoints of all personnel’s are considered for preparing the budget.

The case shows that Nick, a senior official of the company thinks that budgeting practices in the business is not possible as there are more than 50operational sites. However, if participative budget is adopted than preparation of budget would not be that difficult as opinions of the supervisors would guide the management to formulate the budget without the hassle of visiting each site. The target which would be set by the management would be more realistic and thereby can be achieved by the management with a little effort. Therefore, it can be said that a participative budget would be much more favourable for the business.

The budgeting setting process is a time consuming process even though the effectiveness of the technique outweighs the hassle which is involved in the preparation of the budget of the company. The opinion of Nick is accurate that the budgeting process if implement for the business of Amcor ltd would be hectic as there are 50operational sites and preparation of master budget would be a difficult process. However, the management can implement a participative budget so that it can overcome the hassle slightly and rely on the opinions of the lower level manager of Amcor ltd for such 50 operational sites for formulating the budget for the business. The lower managers of such sites would have a better idea regarding the capacity which the business has for conducting the operations of the business. It is for such reason that participative budget would be the most appropriate option available to the management of Amcor ltd.

The implementation of the participative budget would make the budgeting process less time consuming and thereby promote efficiency in the operations of the business. In addition to this, the management of the company needs to consider that the advantages of setting up a budget would help the management to properly control the activities of the business. The efforts which are put in the budgeting process is completely worth it as it improves the internal functions of the business and promotes transparency in the operations of the business. Therefore, it can be said that the management of Amcor ltd needs to implement a participative budget so that proper operational process can be maintained.

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