Vietnam’s Jewelry Manufacturing Industry: The Problem Of Cost Management And Profit Margin In Sakura Ltd. Company

The jewelry division of Sakura Plastic Company specialized in mass manufacturing high quality golden jewelry based on the combination of high technology machines, saving material cost by reusing waste material of plastic production. Furthermore, the raising demand of high quality jewelry products since 2013 in Vietnam also flavors the establishment of this jewelry division. The symbol for the success of this division is the continuously increase in revenue and the product of Sakura Jewelry are highly praised by many of its customers. Ironically, it is turned out that the division suffered permanent loss since the very first day of business.The problem of this division was revealed as its profit margin usually negative during its lifetime due to the ineffective cost management. The reasons are dropped down into three majors: not all cost and expenses were realized and allocated to the responsible department, in this case the jewelry division; the selling price of each product does not reflecting its cost, that lead to many product were sold at price lower than their actual costs; and finally, the lacking of time and quality information for the decision making process due to the incompetent accounting department. These problems must be solved quickly as it is indeed threatening the survival of this division.The first solution is restructuring the company accounting department with more dedicated accountants. Their mission is collecting and accounting (especially allocating) all the cost, expenses and revenue in the real-time basis and providing all required information for decision making. In the meantime, investing in good Enterprise Resources Planning (ERP) program is another wise move to simplify the accounting process and uniting all the company activities with the less effort. Base on the result of the previous steps, the management team will have all required information for decision making, especially pricing strategy.This thesis also studies a sample of 276 product models in order to create a method for quickly estimating cost of production and its price before actual production. The method is based on the famous model: Sell price = Total estimated cost + required profit margin with the allocation of general cost base on the required time of production for each products. It could help the management team realized at least 80% to 90% of the real cost of each product in order to pursue their pricing and other business strategy. Company experts could improve this by implementing more advance methods like Activities Base Cost (ABC) or Balance Scorecards.